There are four models of market system: pure competition, pure monopoly, oligopoly, monopolistic competition.
Let’s describe them briefly:
- Pure competition– is a market structure that is composed of a very big number of firms that produce a standardized product. Entry and exit from this type of market is very easy.
- Pure monopoly- is a market structure in which one firm (or a very few ones) is single seller of a product or service. Entry to this kind of market system is blocked, so one firm can rule the entire industry. Monopolists produce unique product and there is not any reason to difference it, since there are not competitors.
- Monopolistic Competition-is characterized by relatively large number of suppliers who produce differentiated products. There is nonprice competition (each firm is trying to distinguish its product or service by some characteristics like quality, price). Entry to monopolistically competitive industry is relatively easy.
- Oligopoly- is made up of sellers with identical or similar products so that the change in price of one may affect future decisions of other firms.
Pure monopoly, oligopoly and monopolistic competition are considered as imperfect competition.