Market Structures

Market structures

Billy Taylor III

Eco/365

March 13, 2013

Scott Skjordahl

Market structures

To understand the different market structures it is essential to understand how public and private goods, common resources, and monopolies affect supply and demand by how the labor market equilibrium is established. This paper will prove that Wal-Mart is an example of a company that derives from several market structures and evaluate how they compete in these markets. Furthermore, several competitive strategies used to maximize profits along with recommendations are stated throughout the paper.

Goods

Two major characteristics of consumption goods are excludable goods where consumers can prevent other consumers from using it or rivalrous goods where consumption by one consumer prevents consumption from another. The four classification of goods are separated by, public goods, private goods, natural monopolies, and common resources.

Most of the economy falls under excludable private goods, that is when a consumer wants a specific product and is willing to pay for it then once they have the product no other consumer can purchase the same product. On the other public goods is the complete opposite being non- excludable nor rival in consumption. No consumer is excluded from this good whether they pay for it or not. Furthermore, Common resources can be natural monopolies because they are excludable but not rival in consumption.

Wal-Mart Structures

Wal-Mart has a few markets structure characteristics. First the oligopoly has few firms and are also "identified by industries where there are significant barriers to entry, interdependence among firms in output and pricing decisions, and the possibility of maximizing "economic profits" in the long run" ( Wall street journal, 2005, p.13). Thus, has differentiated products, a few sellers and a hard market entry. Moreover, Wal-Mart is able to push out of the market competition because of reasonable and affordable low prices. This results in a decline in mom and pop stores or even larger retail chains. "Traditional oligopolies have used their clout to keep the prices for goods at a high level, but Wal-Mart wields its control to keep prices low, thus causing its suppliers to cut into their own profits" (Hannaford, 2005). Thus, ensuring every price is low such as, inventory, employee wages, workforce, and this puts pressure on suppliers to reduce the cost of products because of the demand compared to other competitors like Costco. "When an oligopolistic firm's prices or production change, it will cause noticeable effects on the sale and earnings