Forms of Industrial Organization
Economists group industries into four distinct market structures: monopoly, oligopoly, monopolistic competition, and competitive market. These four market models differ in several respects: the number of firms in the industry, whether those firms produce a standardized product or try to differentiate their products from those of other firms, and how easy or how difficult it is for firms to enter the industry (McConnell & Brue, 2004). This paper further defines each market structure and provides an example of a company representing each market structure.
Monopoly
A monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it, and what pricing can be charged for it. A great example of a monopoly was the company Standard Oil, which existed roughly from 1895 to 1911. Standard Oil grew by acquiring its competitors and forming secret agreements with railroad transport to allow them to undercut competitors. Because Standard Oil was able to sell its product cheaper than its competitors, consumers continued to purchase Standard Oil product, forcing the other companies to either go out of business or sell out to Standard Oil while there was still some value in the company. Marketshare soared and Standard Oil gained the ability to set what pricing it wanted on its product because other competitors simply did not exist or did not have the distribution penetration of Standard Oil. In 1909 the government stepped with the Sherman Anti-Trist Act and broke up Standard Oil into several well known companies that still exist today, including Chevron, Amoco, BP, Exxon Conoco and Philips. Oligopoly “An oligopoly is a market dominated by a few large suppliers. The degree