chapter
7 Pages

COMPETITION AND MONOPOLY

Contrasting states of markets classified according to the number of firms participating in them.

Market structures are often arrayed on a spectrum of conditions between the extremes of perfect competition and its complete opposite, monopoly. Previously in the nineteenth century competition was contrasted with cooperation. Competition was regarded as an evil which pushed down wages and added to workers’ misery; cooperation was supposed to guarantee a fair reward. In the more modern view of competition and other market states, the spectrum starts with the largest number of firms in perfect competition, then the number of firms declines through monopolistic competition, oligopoly, duopoly and finally to monopoly: these markets operate according to different principles in determining output and prices. Seen from a buyer’s point of view, a market with a sole buyer would be a monopsony, or with a few dominant sellers, an oligopsony.