Market Structure

Market structure is one of the most useful tools one can use to analyze an industry. Much as the name implies, market structure is a description of the defining characteristics of a competitive (or non-competitive) environment. Lets take a look at of some of these characteristics:

• Buyer Entry Barriers - Difficulty of becoming a buyer of a product or service (cost of switching)
  
• Seller Entry Barriers - Difficulty of competing in market (investments, technical know-how, etc).
  
• Number of Buyers
• Number of Sellers

Now that we have those defined, lets define some of the common types of competitive environments (ordered in increasing amounts of competitiveness):

• Monopoly
• Oligopoly
• Imperfect Competition
• Perfect Competition

Perfect competition and monopoly are the only two of those that have pretty strict definitions:

Oligopololy is generally characterized as having a small number of dominant sellers in a market. As such, firms are generally less profitable than monopolists, but still operate in a market that is significantly less competitive than perfect competition. Imperfect competition is generally the same idea, though with even more sellers and thusly more competition.

The number of buyers in a market acts in an interesting way. As the number increases, each individual buyer loses power in the market, which actually makes it less competitive. In a market with only one buyer, known as a monopsony, the lone buyer wields a large amount of power in the market due the nature of it being the sole customer.

Buyer entry barriers to me says something about product differentiation. It defines how easily a buyer can subsitute one product for another. A greater amount of substitutability (lower buyer entry barriers) leads to greater competition. A commodity such as wheat or oil is traded on the open market because it is substitutable and undifferentiated. A differentiated product leads to a market with different prices (think Buick vs. Ferrari).

There are plenty of other resources on this subject that I would encourage you to read here are a few:
http://en.wikipedia.org/wiki/Market_structure
http://www.westga.edu/~bquest/1997/ecnmkt.html