Objectifs globaux :
Explain why the market is an institution and distinguish between different market structures.
Objectifs travaillés :
Multiple definitions, certain French services and their roles, competitive markets.
Resources :
PDF: Market exchange and trust
PDF: Types of market structures
PDF: Evaluation: Séance 2
Contents
Activité 1
Write this definition:
Institution
Structure with a certain stability over time, which is based on social and / or legal rules which organize its operation.
A copyright is a title of intellectual property (literary, artistic) which groups together all the exclusive rights granted on intellectual creations.
By practically eliminating reproduction costs, the internet has facilitated pirating and the dissemination of intellectual works outside the control exercised by their legitimate owner(s).
Ownership of music is no longer guaranteed, it is the whole creative process that is compromised as the creators no longer obtain remuneration for their production(s).
The market is an institution to the extent that it needs rules and conventions, (such as property rights) to function. Copyright is defined and guaranteed by the state. More generally, the market is doubly an institution as (1) « each individual finds it already formed » (M. Mauss, P. Fauconnet, La sociologie, objet et method, 1901) (2) the rules of law are imposed on individuals and constitute a binding framework for the exchange.
Activité 2
Read the text and answer the questions.
Due to imperfection of information, the impossibility of drawing up complete contracts and the disproportionate costs that would require full control of the terms of the exchange, a minimum of trust is necessary.
In the case of transactions made through eBay or Bitcoin, and in service exchanges … trust plays a very important role.
The less confidence there is, the more the contracts must be complete and the more numerous and sophisticated must be the techniques of control of the modalities of execution of the contract. These two constraints considerably increase transaction costs.
As before, the market is an institution as it needs rules and conventions to function. Trust is a prerequisite to the market and it is necessary for it to work.
Activité 3
Here is a list of administrative authorities responsible for regulating certain markets:
1. Competition Authority.
2. Energy Regulatory Commission (CRE).
3. Regulatory Authority for Electronic Communications and Post (ARCEP)
4. Regulatory Authority for Railway Activities (ARAF)
Associate each authority with a role:
Role A: Fight against anti-competitive practices, whatever the market (fight against agreements between companies, fight against abuses of dominant position, etc.).
Role B: Ensure the exercise of effective and fair competition for the benefit of consumers on the electronic communications market (setting of subscription conditions, supply of frequencies to operators, number of operators, etc.).
Role C: Ensure that any railway company can access the railway network and related services without discrimination and in an equitable manner (setting the amount of toll paid by network users, etc.).
Role D: Ensure that the conditions of access to the electricity and natural gas transmission and distribution networks do not hinder the development of competition (fixing the price of energy, safety standards, etc.).
1=A : 2=D : 3=B : 4=C
Activité 4
Homogeneous products are identical products in all respects. Differentiated products are closely related products which differ from one another on one or more of their characteristics.
We used « monopolistic competition » because a very large number of suppliers offer similar products (competition) but which are not exactly comparable on all of their characteristics, each company having sufficiently differentiated its product to being able to claim to be the only one to offer it (monopoly).
A baguette, a take-away coffee, personal transport services … are goods or services that are traded in markets are close to perfect competition.
Cell phones, branded clothing … are traded in monopolistically competitive markets. Mobile phone services, energy … are all traded in oligopoly markets. Rail transport in mainland France is still a monopoly market (SNCF Mobilités).
Activité 5
Write this definition.
Competitive market
In a competitive market, several conditions are required including:
- the very large number of suppliers and applicants (which guarantees that each participant will be too small to influence the market price: they are therefore a “price taker”);
- the free entry and exit of suppliers and applicants (which guarantees the absence of an established position);
- non-differentiation of products (which guarantees the possibility of comparing products to each other).
Evaluation
How does a competitive market work? – Lesson 2