At one end of the continuum, perfect competition has a large number of small firms with no market control. Moving along the continuum, monopolistic competition has a large number of small firms with some market control. Farther along, monopolistic competition blends into oligopoly, which has a small number of large firms with extensive market control. Reaching the other end, monopoly has a single firm with complete market control.

A Continuum of Sellers

Market Structure Continuum

The position that each of the four basic market structures--perfect competition, monopolistic competition, oligopoly, and monopoly--occupy on the continuum can be identified easily with the click of a few buttons.

• Perfect Competition: Click the [Perfect Competition] button to illustrate that perfect competition rests at the far left of the market structure continuum. It is characterized by a large number of relatively small competitors, each with no market control.


• Monopolistic Competition: Click the [Monopolistic Competition] button to see that monopolistic competition occupies much of the left portion of the market structure continuum, between perfect competition and the middle of the continuum. It is characterized by a large number of relatively small competitors, each with a modest degree of market control.


• Oligopoly: Next up is oligopoly, which occupies much of the right portion of the market structure continuum and can be highlighted with a click of the [Oligopoly] button. It is characterized by a small number of relatively large competitors, each with substantial market control.


• Monopoly: At the far right of the market structure continuum is monopoly, characterized by a single competitor and extensive market control. The position of this market structure can be revealed with a click of the [Monopoly] button.

The real world is primarily populated by the two remaining market structures, monopolistic competition and oligopoly. With only a few exceptions, real world industries and markets are best represented by one of these two market structures.

Shades of Gray

In particular, some real world markets are best represented by monopolistic competition and others by oligopoly. However, other market structures have some characteristics of monopolistic competition, but also a few characteristics of oligopoly. Some monopolistically competitive markets are almost perfect competition. Some oligopolistic market structures are almost monopoly.

The market structure continuum IS a continuum. The four basic market structures that make up the continuum are best thought of as guidelines or general categories. But variation and differences are the norm rather than the exception.

A Continuum of Buyers

Market Structure Continuum

Such a buying-side continuum is illustrated in this exhibit.

• Perfect Competition: At the far left of the continuum is perfect competition. As with the selling-side continuum, it is characterized by a large number of relatively small competitors, each with no market control.


• Monopsonistic Competition: Monopsonistic competition occupies much of the left portion of the market structure continuum, between perfect competition and the middle of the continuum. It is characterized by a large number of relatively small buyers, each with a modest degree of market control. It is the buying side counterpart to monopolistic competition.


• Oligopsony: Next up is oligopsony, which occupies much of the right portion of the market structure continuum between monopsony and the middle of the continuum. It is characterized by a small number of relatively large buyers, each with substantial market control. It is the buying side counterpart to oligopoly.


• Monopsony: At the far right of the market structure continuum is monopsony, characterized by a single buyer and extensive market control. It is the buying side counterpart to monopoly.