Market structure is a factor that a new firm must consider before engaging in any business activity in a poor activity. A market structures identifies a market in reference to the number of competitors producing similar products. The major market structures are monopolistic, oligopoly, oligopsony, duopoly, monopoly, monopsony and perfect competition (Norman, et, al, 2000). Monopolistic competition refers to a market structure with a number of competitions each having small percentage of market structure offering differentially products.
Oligopoly is a market structure with limited number of firms controlling a very market share. A unique case of oligopoly with two firms is refereed to as duopoly. A market structure with few buyers but many firms is referred to as oligopsony . A monopoly kind of market structure dominated by one firm while a monopsony is a market structure dominated by a single buyer. Based on the above market structures, a new firm will find it hard to overcome obstacles in monopoly and oligopoly market structure. Even though there are listed barriers of entry, the major barrier is the unfair competition in the market. In oligopsony and monopsony, there are barriers to entry but upon overcome these barriers, a new firm can enter in market however in a poor economy the firm is likely to succeed provided the buyers have the purchasing power. The perfect competition market structure “has what is called a perfectly elastic demand” (Pirayoff, 2004, P.119) and comprises of many buyers and sellers. Even though it is a free market, the fierce competition between the players in this market coupled with the poor economy is likely to limit the chances of success for a new firm.
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