Characteristics Of A Market Structure - 1807 Words

What are the characteristics of a market and why are they so important? Simply, the characteristics that define a market are the market structure. The market structure is comprised of features that best describe the goods or services of a market along with the organizational or competitive characteristics (What is Economics?). Market structure can also define the number of companies that exist within a market, producing the same products or providing the same services. The market structure bares great influence on the actions and reactions of firms operating within the market, it also bares great significance on the way a firm will market and price the available products and services. Market structure is also a key component for a company†¦show more content†¦For a company to possess that freedom of entering and exiting implies that resources such as capital are mobile and that it will not result in the creation of barriers to entry. An example of these possible barriers of entry could be increasingly high start up costs that may incur for a new organization. 1.2. Pricing Strategies When figuring pricing strategies within the perfect competition model a firm must consider that the attributes of the product and any cost advantages will eventually be exposed, and will either be mimicked or beaten (Whinston, 1995). Though the perfect competition model is ideal, it is seemingly impossible for a single firm to consistently produce its services and goods at the lowest cost. Thus, the perfect competitor must continuously seek to improve cost management, its production technology, and even the economies of scope. The most effective way to do so is through the cost leadership strategy (Kimmons, 2013). This strategy both requires and allows the corporation to constantly seek ways to further decrease costs, enabling the firm to stay more advanced with leverage over the competition. This process needs to be repetitive, in order to maintain established leverage. 2. Monopolistic Competition 2.1. Description Monopolistic competition is a form of imperfect competition where firms offers products or services that are different from competitors meaning that the