Market Structure Analysis

Overview

Market structure determines how firms compete, set prices, and earn profits. The four structures — perfect competition, monopolistic competition, oligopoly, monopoly — predict increasingly different behaviors as concentration rises and differentiation increases.

Framework

IRON LAW: Structure Determines Behavior, Not Vice Versa

Classify the market structure FIRST based on structural characteristics
(number of firms, barriers, differentiation), THEN predict behavior.
"This company charges high prices" does not mean it's a monopoly —
high prices can occur in oligopolies and even monopolistic competition.

The Four Structures