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Market structure makes it easier to understand the characteristics of diverse markets. The main body of the market is composed of suppliers and demanders. Both parties are equal and indispensable. The market structure determines the price formation method of the market.
The structure of a well-functioning market is defined by the theory of perfect competition. Well-functioning markets of the real world are never perfect, but basic structural characteristics can be approximated for real world markets, for example: Many small buyers and sellers; Buyers and sellers have equal access to information
The theory of contestable markets has been used to argue for weaker application of antitrust laws, as simply observing a monopoly market may not prove that a firm is exploiting its market power to control the price level. [5] Baumol himself argued based on the theory for both deregulation in certain industries and for more regulation in others. [6]
The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. [1] Firms are key drivers in economics, providing goods and services in return for monetary payments and rewards.
The structure–conduct–performance (SCP) paradigm, first published by economists Edward Chamberlin and Joan Robinson in 1933 [1] and subsequently developed by Joe S. Bain, is a model in industrial organization economics that offers a causal theoretical explanation for firm performance through economic conduct on incomplete markets.
In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition.
Modern mainstream economics builds on neoclassical economics but with many refinements that either supplement or generalise earlier analysis, such as econometrics, game theory, analysis of market failure and imperfect competition, and the neoclassical model of economic growth for analysing long-run variables affecting national income.
There is debate surrounding how relevant it is to real world markets and whether it should be a market structure that should be used as a benchmark. Neoclassical economists believe that perfect competition creates a perfect market structure, with the best possible economic outcomes for both consumers and society.