If economics were a board game, market structure would set the rules and game theory would tell us how to play. Together, they explain why firms sometimes cooperate, sometimes compete ferociously, and occasionally act in ways that seem — at least at first glance — irrational.
Defining the Landscape
Market structure describes how industries are organized: the number of firms, the nature of products, and how easy it is for competitors to enter or exit. The main categories are:
Perfect competition: Many firms, identical products, no one can outsmart the price. Think farmers selling wheat — your wheat is my wheat, and neither of us can persuade the customer otherwise.
Monopolistic competition: Many firms, but with differentiation. Hamburgers, coffee shops, hair salons — each claims to be “unique” (though your latte art may look suspiciously similar to mine).
Oligopoly: A few large firms dominate. Cars, airlines, or soft drinks — your strategy depends heavily on rivals’ reactions.
Monopoly: Just one firm calls the shots. Utilities are classic examples. They set the price, and you pay, unless you’re ready to live by candlelight.
MBA, certified agile coach and experienced strategy analyst, specializing in business agility, agile leadership, Beyond Budgeting, and general management.
