Types of Markets

Although many markets exist on the traditional sense–such as a flea market–there are various other types of markets and various organizational structures to assist their functions.

A market can be organized as an auction, as a private electronic market, as a shopping center, as a complex institution such as a stock market, and as an informal discussion between two individuals.

In economics, a market that runs under laissez-faire policies is a free market. It is “free” in the sense that the government makes no attempt to intervene through taxes, subsidies, minimum wages, price ceilings, etc. Market prices may be distorted by a seller or sellers with monopoly power, or a buyer with monopolic power. Such price distortions can have an adverse effect on market participant’s welfare and reduce the efficiency of market outcomes. Also, the level of organization or negotiation power of buyers, markedly affects the functioning of the market. Markets where price negotiations do not arrive at efficient outcomes for both sides are said to experience market failure. Statewide laws and regulations regulate most markets. While barter markets exist, most markets use currency or some other form of money.

Markets of varying types can spontaneously arise whenever a party has interest in a good or service that some other party can provide. Hence there can be a market for cigarettes in correctional facilities, another for chewing gum in a playground, and yet another for contracts for the future delivery of a commodity. There can be black markets, where a good is exchanged illegally and virtual markets, such as eBay, in which buyers and sellers do not physically interact. There can also be markets for goods under a command economy despite pressure to repress them.

Leave a Reply

Your email address will not be published. Required fields are marked *