Market Structure Analysis
Number of sources: 3
Use IBISWorld to complete a Market Structure Analysis. This assignment was adapted from Core Microeconomics, Chiang, 3rd edition.
Access IBISWorld, US Industry Reports (NAICS) for products:
1. Choose TWO specific products. These products MUST be sold in different industries. For example, you could choose domestic airline travel and dish detergent.
2. Consider the Market Factors for each product. Please conduct some research on IBISWorld [and outside research] to address TWO to FOUR market factors listed in the Market Factors section below:
a. Market Factor 1 – Number of firms:
â€¢ Is the industry composed of many firms, each with limited or no ability to set the market price, such as local pizza places, or is it dominated by a large firm such as Wal-Mart that can influence price regardless of the number of other firms?
b. Market Factor 2 – Nature of the product:
â€¢ Are we talking about a homogeneous product such as salt, for which no consumer will pay a premium or are we considering leather handbags, which consumers may think vary greatly, in that some firms (Coach, Gucci) produce better goods than others?
c. Market Factor 3 – Barriers to entry:
â€¢ Does the industry require low start-up and maintenance costs such as found at a roadside fruit and vegetable stand, or is it a computer-chip business that may require $1 billion to build a new chip plant?
d. Market Factor 4 – Price control (market power):
â€¢ For example, pharmaceutical companies can set prices for new medicines, at least for a period of time, because of patent protection. Farmers and copper producers have virtually no control and get their prices from world markets. Possible market structures range from perfect competition, characterized by many firms, to monopoly, where an industry is made up of only one firm.
Factor #1 explanation:
Factor #2 explanation:
3. Conduct some additional research and reflect upon the information that you have learned in this course, then make a determination regarding the type of market in which the product is sold. In other words, indicate whether it operates in a perfectly competitive, monopoly, oligopoly, or monopolistically competitive market. Justify your response.