Market Structure
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Since antiquity, a distinction between monopoly and competitive market structures has been recognized. Aristotle (Book I, 5) characterized ‘monopoly’ [ μ ó ν os (alone), \( \pi \omega \lambda \upepsilon \iota \overset{\frown }{\nu } \) (sell)] as a situation in which a single trader engrossed the entire supply. He recounted how one such iron ore monopolist had been expelled from Syracuse by its ruler, Dionysius. Adam Smith (1776, Book I, chapter VI) advanced somewhat beyond the Aristotelean schema, contrasting the price under monopoly (‘the highest which can be got’) to that of free competition (‘the lowest which the sellers can commonly afford to take, and at the same time continue their business’). The most important single step toward a modern theory of how market structure matters was taken by Cournot (1838). He perceived correctly that a monopolist confronts the downward-sloping demand function for its product, and he derived the mathematical conditions (essentially, equality of marginal revenue with marginal cost) by which the monopolist maximized its profits. He then showed how market prices fell with increasing numbers of competitors, converging in the many-seller case toward a zero-profit condition. Thus Cournot provided among other things the first theory of oligopoly, that is, of markets with only a few sellers.
This chapter was originally published in The New Palgrave: A Dictionary of Economics , 1st edition, 1987. Edited by John Eatwell, Murray Milgate and Peter Newman
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Scherer, F.M. (1987). Market Structure. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_960-1
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DOI : https://doi.org/10.1057/978-1-349-95121-5_960-1
Received : 12 August 2016
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Published : 27 November 2016
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Market Structure: The Analysis of Markets and Competition - Knight, B. and McGee, J. (2015). Market Structure: The Analysis of Markets and Competition. In Wiley Encyclopedia of Management - Volume 12 Strategic Management (eds C. L. Cooper, J. McGee and T. Sammut‐Bonnici)
2015, Wiley Encyclopedia of Management
A market is, in its general sense, the group of suppliers and buyers who are in sufficiently close contact for market transactions to take place and for those transactions to effect the terms of trade (the price). The structure of the markets indicates the relative number of buyers and sellers in the market and therefore the nature of competition that will take place. Market conditions can vary from the perfectly competitive to the monopolistic, and the consequences of these can be seen in market conduct and performance outcomes.
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Market structure and horizontal growth strategies – A case study of the container shipping industry
This article aims to review the structural transformation in the container shipping industry from 1995 to 2020 and identify the growth strategies of global carriers to enhance their market presence. Along with large investments in mega vessels, the growing deployment of charter capacity in all ship sectors has been a prominent trend in fleet expansion. The waves of mergers/acquisitions and bankruptcies have narrowed the group of global carriers. In addition to internal and external growth, they have been increasingly involved in strategic alliances to expand service coverage and compete well with powerful rivals. A few mega carriers have progressively captured the industry. In 2020, the Top 12 controlled 88 % of the global supply, and nearly 56 % was in the hands of the Top 4. Besides the substantial expansion of the four biggest carriers, we can identify the de-concentration within this gigantic group through the less inequality between their market shares.
Acknowledgment
We are thankful to the editors and reviewers for many detailed comments; they have been extremely helpful in terms of improving the quality of this article.
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