Types of Competition
Economic theory usually differentiates across the four major types of market structure: monopoly, oligopoly, monopolistic competition, and perfect competition. Although the list of market structures can be virtually unlimited, these four types are considered to be the basis for understanding the principles of market performance in different market conditions. Each of the four types of market structures possesses its benefits and drawbacks. In any of these markets, an entrepreneur can develop a strategy appropriate for conquering a part of the market niche. Although for many entrepreneurs monopoly seems an excellent choice (no competitors and full control over the product and its price), in reality it is monopolistic competition that provides entrepreneurs with sufficient stimuli for growth, does not limit them in their desire to manage the types of products they manufacture, as well as the prices they want to establish for their customers. The term “market structure” usually implies the way markets are organized. The level of competition, the number of firms-participants, the quantity and the assortment of products offered by firms – all these are used to describe several specific types of market structure. In economic theory, markets are usually divided across the four different categories: monopoly, oligopoly, monopolistic competition, and perfect competition. To begin with, monopoly is a market structure, which comprises only one seller; monopoly usually covers only one specific business or one specific industry. Certain countries and certain laws define monopoly as covering 25% and more of one specific market. Certainly, under monopoly conditions firms are more likely to maximize their profits: they possess full control over what they produce and can establish any price they deem necessary for each type of products sold. Also, they are given enough opportunities to invest in new products, but due to the lack of competition, consumers do not have any product