Comparison between market structures

A perfectly competitive market is one in which the number of buyers and sellers is very large, all engaged in buying and selling a homogeneous product without any artificial restrictions and possessing perfect knowledge of market at a time. In the words of A. The following are the conditions for the existence of perfect competition: The first condition is that the number of buyers and sellers must be so large that none of them individually is in a position to influence the price and output of the industry as a whole.

Comparison between market structures

The Report considers whether order executions differ in markets with differing levels of fragmentation and customer order interaction. The Report uses customer order data, which has only recently come available for Nasdaq securities. This enables accurate calculation of effective and realized spreads and order execution speeds, and also allows separate analysis of different types of orders.

Obviously, any comparative analysis of market structures is necessarily complex. In spite of the fact that every attempt has been made to design the tests and present the results in a clear and unbiased manner, there are three important caveats that should be carefully considered by anyone reviewing this Report: There is no single, all-encompassing measure of execution quality.

For Comparison between market structures, although effective spread is an important component, some investors may prefer a fast execution at a guaranteed price often available for small orders in Nasdaq securities at dealer market centers to a slower execution with the possibility of price improvement often available for small orders on the NYSE.

In addition, effective spread measures the handling of a single trade, without considering the ability of a market structure to absorb a series of trades with minimal price volatility.

Due to feasibility considerations, the size of the sample is somewhat limited. The one-week period of June 5, to June 9, covers a single, relatively tranquil episode that followed a period of higher stress and volatility.

The results may differ under a different set of circumstances. Although the Report uses both matched-sample and regression techniques to try to control for the differences between the stocks that are listed on Nasdaq and the NYSE, these controls can never be perfect.

Thus, there is always the possibility that the reported results are driven by remaining differences between the stocks rather than by differences in the degree of order interaction between the two market structures.

Comparison between market structures

Methods The results are separately calculated for four categories of Nasdaq stocks: In selecting the stocks for the Report, some initial filters were applied to ensure the availability of adequate historical information.

These orders are for a total of Nasdaq stocks, 25 of which were specifically selected by Nasdaq as being their top stocks in terms of trading volume and market capitalization the very large category. The Commission staff selected the remaining Nasdaq stocks by taking a random sample of Nasdaq stocks stratified by dollar trading volume.

The Report includes a "matched pair" analysis that compares order executions in Nasdaq-listed stocks to NYSE order executions in NYSE-listed stocks, where the stocks in each pair have similar market capitalization, share price, return volatility and trading volume.

For each measure, the first test uses only the 58 pairs that have the smallest aggregate differences across the four criteria. This analysis is complemented and confirmed by eleven other tests that use larger samples and use regression techniques to control for differences in these and other features.

Seven of these tests rely entirely on regression techniques to make comparisons across the two samples, without any need to consider specific matched pairs.

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The average market capitalizations for these 58 matched pairs of Nasdaq and NYSE-listed stocks are shown below, broken down by category. Market Capitalizations for Matched Pairs.A COMPARATIVE STUDY OF MARKET STRUCTURES Perfect Competition No.

of Firms A large number, each being small. Monopolistic Competition A large number, each have some amount of market power.

We will write a custom essay sample on Comparison Between Market . Oligopoly is a market structure; monopolistic competition is another market structure. They compare in that each is a type of market structure. Both operate in markets with imperfect competition. A firm under Perfect competition is a Price-taker, i.e.

an individual firm has no control over the price and has to accept the price as determined by the market forces of demand and supply. A monopolist is a Price-Maker, i.e., a firm has complete control over the price and fixes its own price. A. A firm under Perfect competition is a Price-taker, i.e.

an individual firm has no control over the price and has to accept the price as determined by the market forces of demand and supply. A monopolist is a Price-Maker, i.e., a firm has complete control over the price and fixes its own price.

A. working papers the effect of subsidized imports on domestic industry: a comparison of market structures morris e. mrokre working paper no. Office of Economic Analysis: Report on the Comparison of Order Executions Across Equity Market Structures January 8, Executive Summary Background.

The Comparison between Different Market Structures | Microeconomics