Group Behaviour in Different Market Structures

Perfect Competition:

In a perfect competition market structure, there are a large number of buyers and sellers who are homogenous in nature. Here, no individual seller or buyer has the power to influence the price of the product. Hence, the group behaviour is highly competitive in nature, and it is difficult for any seller to make a profit in the long run. The group behaviour is such that any change in the price of the product by one seller will have no impact on the overall market price.

Monopolistic Competition:

In a monopolistic competition market structure, there are a large number of buyers and sellers, but the products sold by each seller are differentiated in some way. Here, sellers have some degree of control over the price of their products. Hence, the group behaviour is such that sellers try to differentiate their products from those of their competitors and engage in non-price competition. The group behaviour is highly competitive, but sellers have some power over the price of their products.

Monopoly:

In a monopoly market structure, there is only one seller who has complete control over the price of the product. Here, the group behaviour is such that the seller can charge any price they want, and buyers have no other option but to buy from them. The seller can maximise their profits by charging a high price for the product. The group behaviour is highly non-competitive, and there is no incentive for the seller to improve the quality of their product or reduce the price.

Oligopoly:

In an oligopoly market structure, there are a small number of sellers who dominate the market. Here, the group behaviour is highly competitive, but there is also interdependence among the sellers. Any change in the price or output by one seller will have an impact on the market price and the profits of the other sellers. Hence, the group behaviour is such that sellers engage in strategic decision making to maximise their profits. They may collude and form a cartel to reduce competition, or engage in price wars to gain market share.

Conclusion:

Thus, the group behaviour in different market structures varies depending on the number of sellers, the degree of product differentiation, and the power of individual sellers to influence the price of the product. Understanding the group behaviour is crucial for firms to make strategic decisions and maximise their profits in a given market structure.