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CHAPTER 2 MARK ET STRUCTURE CONDUCT AND PERFORMANCE Market Struct ure – Me aning The term structure refers to something that has organization and dimension – shape, size and design; and which is evolved for the purpose of performing a function. A function modifies the structure, and the nature of the existing structure limits the performance of functions. By the term market structure we refer to the size and design of the market. It also includes the manner of the operation of the market. Some of the expressions describing the market structure are: 1. Market structure refers to those organizational characteristics of a market which influence the nature of competition and pricing, and affect the conduct of business firms, 2. Market structure refers to those characteristics of the market which affect the traders' behaviour and their performances, 3. Market structure is the formal organization of the functional activity of a marketing institution.  An understanding and knowledge of the market structure is essential for identifying the imperfections in the performance of a market. Components of Market Structure The components of the market structure, which together determine the conduct and performance of the market, are: 1. Concentration of Market Power The concentration of market power is an important element determining the nature of competition and consequently of market conduct and performance. This is measured by the number and size of firms existing in the market. The extent of concentration represents the control of an individual firm or a group of firms over the buying and selling of the produce. A high degree of market concentration restricts the movement of goods between buyers and sellers at fair and competitive prices, and creates an oligopoly or oligopsony situation in the market. 2. Degree of Product Differentiation Homogeneous or other nature of the product affects the market structure. If products are homogeneous, the price variations in the market will not be wide. When

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