Market structure

The market structure or market form for a good, service or commodity is a description of the nature of the market, particularly of the supplier (sellers/producers) and the manner in which they compete on price, quantity, and product differentiation.

The most common loose descriptions of market structure are given below:

Type of market structure	Description based on number of sellers	How sellers decide on price and quantity	Social efficiency
monopoly	a single seller	The seller is free to determine both the price and the quantity supplied, which it typically does for profit maximization. A monopoly may be a natural monopoly or a coercive monopoly. Monopolies are checked by the danger of potential competition, particularly in contestable markets.	Monopolies may be socially inefficient for the following reason: a seller may deliberately price a good higher than the level that maximizes social surplus so as to maximize the seller's share of social surplus. Explicitly, by pricing at a level strictly higher than marginal cost, the monopolist does not sell to those buyers whose reservation price is in between, leading to a deadweight loss. If the seller is able to perform price discrimination, then the social surplus problem is mitigated, but the seller ends up capturing a larger share of the now enhanced social surplus.
oligopoly	a small number of sellers	The key feature is that sellers need to engage in strategic interaction, i.e., they need to anticipate the plans and moves of their small number of competitors. Firm need to engage in some practical game theory.	collusion in the form of cartels and tacit collusion can cause an oligopoly to temporarily and partially behave like a monopoly with the accompanying social inefficiency. In practice, cartels tend to break down at least somewhat, so some of the benefits of competition also exist. Oligopolies also have some some inefficiences absent in monopolies, such as the possibility of arms races in advertising or other arenas that do not generate net value for anybody but are intended to fight for market share.
perfect competition	a large number of sellers, none of whom commands a significant share of the market.	Sellers have very little leeway in determining the price, which is taken as the market price (see convergence towards market price). However, each firm can decide the quantity it produces/supplies. See determination of quantity supplied by firm in perfectly competitive market.	considered to be socially efficient, at least in the short run, in the sense that it maximizes social surplus.