What is polypol?

In economics and in particular in the field of microeconomics, polypol is a form of market in which a large number of market participants face each other on the supply and / or demand side. The corresponding situations are known as the supply or demand polypole. If there are many market participants on both sides, one speaks of a bilateral polypole. The bilateral polypol is also known as the atomized market structure.

In this lesson we will show you the distinguishing features between the different forms of polypole and look at the behavior of the individual market participants. At the end we provide you with a few practice questions that you can use to control your newly acquired knowledge.

Why should you know the polypole?

Along with monopoly and oligopoly, polypol is one of the three elementary forms of market in economics and especially in microeconomics.

In practice, demand-side polypoles occur comparatively frequently, which is why it is important to know the structure of this type of market and thus be able to better assess the behavior of market participants.

According to electronicsmatter, Polypol is also considered to be the best possible market form, as there is lively competition among suppliers and buyers and suppliers cannot influence the market price directly, which reduces their market power to a minimum.

Essential characteristics of the polypole

Polypol is characterized by the fact that there is a large number of market participants on at least one side ( supply or demand ) who compete with one another.

If this situation is found in a perfect market, one speaks of complete competition. Similarly, one speaks of the same situation in an “imperfect market” – which corresponds to the normal case – of incomplete competition. Since the state of complete competition is seldom reached in reality, the polypole is more of a construct of an ideal state.

Due to the very low influence, which makes it practically impossible for individual providers to influence the market price, they have only a negligible degree of market power. Inquirers always have the option of switching to another provider. In a perfect market, providers only have one position as a volume adjustor.

In imperfect markets, on the other hand, there is a state of monopoly competition. Here the providers are able to vary the price. The individual providers offer similar, but not identical, products in their range. Location advantages can also be relevant. The same conditions apply to consumers in a perfect market, since they cannot influence the market price either. In these circumstances, you are therefore only considered to be the price taker.

polypol

Types of polypole

There are three types of polypole:

  • Supply-side polypole
  • demand-side polypol
  • bilateral polypole

When only one polyp is mentioned, it usually means the bilateral polyp.

Supply-side polypole

The supply-side polypol is characterized by a large number of providers. Depending on how many inquirers are faced with these, different terms can be found in the literature for the respective situation.

If there is only one customer facing the many suppliers, it is a supply monopoly.

Example

A typical example of this is the market for government contracts. If many suppliers meet few potential buyers, one speaks of a demand oligopoly.

Demand-side polypol

In the case of the demand-side polypol, there are many buyers on the one hand and a different number of providers on the other. If there is only one provider, the situation is referred to as a supply monopoly.

Example

Swiss Post provides a typical example for letters weighing up to 100 g. If many buyers encounter a few suppliers, there is talk of a supply oligopoly. In this situation, passengers typically find themselves facing airlines.

Bilateral polypole

A typical example of a bilateral polypole is the catering trade. In a busy pedestrian zone there are a large number of providers who meet a large number of customers.

If one now assumes that there are no preferences on the part of the customers with regard to the tastes or the ingredients used and that they are familiar with the offerings of all restaurateurs, the situation would come very close to a perfect market. However, if there were only one supplier of vegetarian products in the entire pedestrian zone, the prerequisites for monopoly competition would again be met.

 

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