Each of the four market structures has both advantages and disadvantages. The perfectly competitive model, for example, has benefits like cost-saving, freedom of choice, profit maximization, and the lack of artificial limitations. Cost-saving mainly touches on the fact that both sellers and customers do not need to incur additional expenditures to make sales.
The sellers, for example, do not advertise their items, which allows them to offer products at affordable prices, thus, benefiting the consumer. The point that all products offered in the perfectly competitive model are homogeneous, including the price aspect, serves as a benefit to customers. Consumers do not have to spend time choosing where to buy and what to buy. The facet exists as a benefit to the customers while also benefiting sellers in that they do not have to operate with the fear of not selling because of unfair competition.
Sellers also exhibit the assurance of getting profits under the perfectly competitive model due to the market’s stability. However, the market structure has demerits that affect its success and operations. Examples of disadvantages concerning the perfectly competitive market include impracticality in real life, the ability to make profits only in the short run, lack of diversity, and the inability to improve services.
Moreover, the monopolistic competition model has benefits like quality improvement opportunities, increased customer knowledge, creativity, and profit maximization. However, monopolistic competition features disadvantages like unhealthy competition at times, customer exploitation, provision of false information during the advertisement, and increased cost of business. Investors utilizing this market structure need to ensure that the merits overcome the demerits for maximum returns.
Monopolies’ advantages further include prices’ stability, availability during the economic crisis, ability to finance research using high profits, and ability to realize maximum returns. On the other hand, the structure’s disadvantages include unfair trade performances, high prices, lack of substitutes, and price discrimination.
Lastly, oligopolies’ advantages include a simplified market, improved quality, stable prices, and increased product knowledge due to advertisements. The model, however, features disadvantages like high entry barriers, few product choices, reduced innovation, and a lack of price control. The advantages and disadvantages of all the market models make it hard to choose which one is best because each has an appropriate area of operation.