Unit 7: Market Structure for Leisure and Tourism Products

Economics Fifth Semester Notes

Market Structure for Leisure and Tourism Products

Market structure refers to the characteristics of a market, including the number of firms, the nature of competition, and the barriers to entry. In the leisure and tourism industry, there are several types of market structures that are commonly found.

  1. Perfect Competition: In a perfectly competitive market, there are many firms offering identical products, and there are no barriers to entry or exit. In the leisure and tourism industry, it is difficult to find examples of perfect competition because products are often differentiated in terms of location, amenities, and other features.

  2. Monopolistic Competition: In a monopolistically competitive market, there are many firms offering products that are differentiated to some degree. This type of market structure is common in the leisure and tourism industry because businesses often offer unique experiences and amenities to attract customers.

  3. Oligopoly: An oligopoly exists when a few large firms dominate a market. In the leisure and tourism industry, examples of oligopolies include major hotel chains and airlines, which have significant market power and often engage in price competition.

  4. Monopoly: In a monopoly, a single firm dominates a market, and there are no close substitutes for its products. While pure monopolies are rare in the leisure and tourism industry, some attractions and destinations may have a near-monopoly in their region or niche.

  5. Duopoly: A duopoly exists when there are only two firms competing in a market. This market structure is uncommon in the leisure and tourism industry, but it may be found in certain segments, such as online travel booking platforms.

Understanding the market structure of leisure and tourism products can help businesses make strategic decisions about pricing, product differentiation, and entry into new markets.

Characteristics of the market with perfect competition

In a market with perfect competition, there are several key characteristics:

  1. Large number of buyers and sellers: There are a large number of firms producing and selling the same or similar products, and there are also many consumers buying those products.

  2. Homogeneous products: All the products offered in the market are identical, with no differentiation between them.

  3. Free entry and exit: Firms can easily enter or exit the market without any restrictions or barriers.

  4. Perfect information: All buyers and sellers have access to complete and accurate information about the market, including prices, quantities, and quality of products.

  5. Price takers: Firms in a perfectly competitive market are price takers, meaning that they have no control over the market price and must accept the prevailing market price.

  6. No market power: No individual firm has market power or the ability to influence market prices, since there are many other firms producing the same product.

  7. Zero economic profits in the long run: In the long run, firms in a perfectly competitive market earn zero economic profits, since any profits made by one firm will attract new entrants, driving down prices and reducing profits.

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