Question

The purpose of this assignment is to compare the different market structures within the realm of health care. Identify the four basic market structures, describe their role within health economics, describe the advantages and disadvantages of each market structure, and provide a specific health-care-related example of each market structure. Please use two or three peer-reviewed sources to assist you with this assignment.

Answer 1

The four basic market structures:

1. Perfect competition (Pure market competition)
2. Monopolistic competition
3. Oligopoly
4. Monopoly

1. Perfect competition:

It is a kind of market structure where a large number of small firm compete with eachother. Market power shared by all forms i.e., no single firm has control over the market.

Advantages:

• Chances of customer/consumer exploitation is very minimum
• It is a consumer oriented market where consumer is the king of market
• Consumer can get standardized product or service irrespective of location

Disadvantages:

• There is no scope for innovation
• There are no or only a few barriers to entry in the market i.e, any firm can enter into the market

Example of perfect competition in health care system:

In a metro city there are a large number of hospitals and drug shops which compete with eachother.

2. Monopolistic competition:

It is a kind of marketing structure where a large number of firms that are compete with each other. But, all firms sell similar kind of products or services with minor differences.

Advantages:

• There is a scope for innovation
• These are relatively contestable markets

Disadvantages:

• Utility of the product not defined and generation of waste is more
• Advertisements are of no use

Example:

Physicians excert monopolistic competition.

3. Oligopoly:

It is a kind of market structure where market is dominated by a small number of firms i.e, small number of firms hold the market power. These firms either compete with eachother or collaborate with eachother.

Advantages:

• There is high scope for product innovations
• Lower prices and stable market if firms are compete against eachother

Disadvantages:

• Manipulation of consumer choice may happen
• Higher prices and reduced product output if firms are cooperative to eachother
• There are barriers to entry in the market

Example:

Health insurance is an oligopoly

4. Monopoly:

It is a kind of market structure where a single firm has complete market power and it controls the market. In this type of market the single organization have highest level of market and consumer doesn't have any alternative.

Advantages:

• Higher monopoly monopoly profits so that they invest more in product innovation and new product development
• Economies of sacle

Disadvantages:

• Higher prices than competitive market
• Reduced consumer surplus
• No competition and several significant barriers to entry

Example:

In villages there is only one hospital or drug shop which shows monopolistic behaviour

References:

https://www.google.com/url?sa=t&source=web&rct=j&url=https://clutejournals.com/index.php/JBER/article/download/8264/8299/&ved=2ahUKEwiE6b-6lKvrAhU8xzgGHcdLAwQQFjAAegQIARAB&usg=AOvVaw2HV5LmlsAE1bUJZrf9Grdo

https://businessjargons.com/market-structure.html