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A market is a composition of
system A system is a group of interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its boundaries, structure and purpose and expresse ...
s,
institution Institutions, according to Samuel P. Huntington, are "stable, valued, recurring patterns of behavior". Institutions can refer to mechanisms which govern the behavior of a set of individuals within a given community, and are identified with a soc ...
s, procedures,
social relation In social science, a social relation or social interaction is any relationship between two or more individuals. Social relations derived from individual agency form the basis of social structure and the basic object for analysis by social scienti ...
s or
infrastructure Infrastructure is the set of fundamental facilities and systems that support the sustainable functionality of households and firms. Serving a country, city, or other area, including the services and facilities necessary for its economy to function. ...
s whereby parties engage in
exchange Exchange may refer to: Places United States * Exchange, Indiana, an unincorporated community * Exchange, Missouri, an unincorporated community * Exchange, Pennsylvania, an unincorporated community * Exchange, West Virginia, an unincorporated comm ...
. While parties may exchange goods and services by
barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distinguish ...
, most markets rely on sellers offering their goods or services (including
labour power Labour power (in german: Arbeitskraft; in french: force de travail) is a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do work, labour power, from the physical act of wor ...
) to buyers in exchange for
money In a 1786 James Gillray caricature, the plentiful money bags handed to [[King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner">174x174px Money is any item or verifiable record that is generally a ...
. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate [[trade and enable the distribution and [[resource allocation in a society. Markets allow any trade-able item to be evaluated and [[priced. A market [[emergence|emerges more or less [[spontaneous order|spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights (cf.
ownership Ownership is the state or fact of exclusive rights and control over property, which may be any asset, including an object, land or real estate, intellectual property, or until the nineteenth century, human beings. Ownership involves multiple righ ...
) of services and goods. Markets generally supplant gift economies and are often held in place through rules and customs, such as a booth fee, competitive pricing, and source of goods for sale (local produce or stock registration). Markets can differ by products (goods, services) or factors (labour and capital) sold,
product differentiation In economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This involves differentiating it from com ...
, place in which exchanges are carried, buyers targeted, duration, selling process, government regulation, taxes, subsidies,
minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. Beca ...
s,
price ceiling A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings ostensibly to protect consumers from conditions that could make commodit ...

price ceiling
s, legality of exchange, liquidity, intensity of speculation, size, concentration, exchange asymmetry,
relative price A relative price is the price of a commodity such as a good or service in terms of another; i.e., the ratio of two prices. A relative price may be expressed in terms of a ratio between the prices of any two goods or the ratio between the price of o ...
s, volatility and geographic extension. The geographic boundaries of a market may vary considerably, for example the food market in a single building, the real estate market in a local city, the consumer market in an entire country, or the economy of an international
trade bloc A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states. Trade blocs can be stand-alone ag ...

trade bloc
where the same rules apply throughout. Markets can also be worldwide, see for example the global
diamond trade Diamond is a solid form of the element carbon with its atoms arranged in a crystal structure called diamond cubic. At room temperature and pressure, another solid form of carbon known as graphite is the chemically stable form of carbon, but di ...

diamond trade
. National economies can also be classified as
developed market In investing, a developed market is a country that is most developed in terms of its economy and capital markets. The country must be high income, but this also includes openness to foreign ownership, ease of capital movement, and efficiency of mar ...

developed market
s or
developing market 450px| Example of Older Classifications by the IMF and the UN from 2008 A developing country is a country with a less developed industrial base and a low Human Development Index (HDI) relative to other countries. However, this definition is n ...

developing market
s. In
mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also known as orthodox economics, it can be contrasted to het ...

mainstream economics
, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and
information Information can be thought of as the resolution of uncertainty; it answers the question of "What an entity is" and thus defines both its essence and the nature of its characteristics. The concept of ''information'' has different meanings in d ...

information
. The exchange of goods or services, with or without
money In a 1786 James Gillray caricature, the plentiful money bags handed to ,_is_a_[[Financial_transaction.html" "title="King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner">174x174px Money is any item or verifiable record that is generally a ...
, is a [[Financial transaction">transaction Transaction or transactional may refer to: Commerce *Financial transaction, an agreement, communication, or movement carried out between a buyer and a seller to exchange an asset for payment *Debits and credits in a Double-entry bookkeeping syste ...

transaction
. [[Market participants consist of all the buyers and sellers of a [[Goods|good who influence its [[price, which is a major topic of study of [[economics and has given rise to several theories and [[economic models|models concerning the basic market forces of
supply and demand In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liq ...

supply and demand
. A major topic of debate is how much a given market can be considered to be a "
free market In economics, a free market is a system in which the prices for goods and services are self-regulated by buyers and sellers negotiating in an open market. In a free market, the laws and forces of supply and demand are free from any intervention ...

free market
", that is free from
government intervention Economic interventionism, sometimes also called state interventionism, is an economic policy position favouring government intervention in the market process to correct market failures and promote the general welfare of the people. An economic in ...

government intervention
. Microeconomics traditionally focuses on the study of market structure and the efficiency of
market equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. For example, in the standa ...

market equilibrium
; when the latter (if it exists) is not efficient, then economists say that a
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indivi ...

market failure
has occurred. However, it is not always clear how the allocation of resources can be improved since there is always the possibility of
government failure Government failure, in the context of public economics, is an economic inefficiency caused by a government intervention, if the inefficiency would not exist in a true free market. It can be viewed in contrast to a market failure, which is an econom ...

government failure
.


Definition

In economics, a market is a coordinating mechanism that uses prices to convey information among economic entities (such as
firms Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). Simply put, it is "any activity or enterprise entered into for profit." Having a business name does not s ...

firms
, households and individuals) to regulate production and distribution. In his seminal 1937 article "
The Nature of the Firm“The Nature of the Firm” (1937), is an article by Ronald Coase. It offered an economic explanation of why individuals choose to form partnerships, companies and other business entities rather than trading bilaterally through contracts on a market ...

The Nature of the Firm
",
Ronald Coase Ronald Harry Coase (; 29 December 1910 – 2 September 2013) was a British economist and author. He was the Clifton R. Musser Professor of Economics at the University of Chicago Law School, where he arrived in 1964 and remained for the rest of hi ...

Ronald Coase
wrote: "An economist thinks of the economic system as being coordinated by the price mechanism....in economic theory we find that the allocation of factors of production between different uses is determined by the price mechanism". Thus the usage of the price mechanism to convey information is the defining feature of the market. This is in contrast to a firm, which as Coase put it, "the distinguishing mark of the firm is the super-session of the price mechanism". Thus, Firms and Markets are two opposite forms of organizing production; Coase wrote: There are also other hybrid forms of coordinating mechanisms, in between the hierarchical firm and price-coordinating market(e.g.
global value chainThe concepts of a global value chain (GVC) and global supply chain refer to the people, roles and activities involved in the production of goods and services and their supply, distribution, and post-sales activities when those activities must be coor ...

global value chain
s,
Business Venture Venture capital (VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high gro ...

Business Venture
s,
Joint Venture A joint venture is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to access a new ...

Joint Venture
, and
strategic allianceA strategic alliance (also see strategic partnership) is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. The alliance is a cooperation or collaboration which aims f ...

strategic alliance
s). The reasons for the existence of firms or other forms of co-ordinating mechanisms of production and distribution alongside the market are studied in "The Theory of the Firm" literature, with various and theories trying to explain the existence of the firm. Incomplete contract theories that are explicitly based on
bounded rationalityBounded rationality is the idea that rationality is limited when individuals make decisions. Limitations include the difficulty of the decision problem, the cognitive capability of the mind, and the time available to make the decision. Decision-maker ...

bounded rationality
lead to the costs of writing complete contracts. Such theories include: Transaction Cost Economies by
Oliver Williamson Oliver Eaton Williamson (September 27, 1932 – May 21, 2020) was an American economist, a professor at the University of California, Berkeley, and recipient of the 2009 Nobel Memorial Prize in Economic Sciences, which he shared with Elinor Ostrom ...

Oliver Williamson
and Residual Rights Theory by Groomsman, Hart, and Moore. Market-Firms's dichotomy can be contrasted with the relationship between the agents transacting. While in a market the relationship is short term and restricted to the contract, in the case of firms and other co-ordinating mechanisms it is for a longer duration. In the modern world much economic activity takes place through fiat and not the market. Lafontaine and Slade (2007) estimates, in the US, that the total value added in transactions inside the firms equal the total value added of all market transactions. Similarly, 80% of all World Trade is conducted under Global Value Chains (2012 estimate), while 33% (1996 estimate) is intra-firm trade. Nearly 50% of US imports and 30% of exports take place within firms. While Rajan and Zingales (1998) have found that in 43 countries two-thirds of the growth in value added between 1980-90 came from increase in firm size.


Types

A market is one of the many varieties of
system A system is a group of interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its boundaries, structure and purpose and expresse ...

system
s,
institution Institutions, according to Samuel P. Huntington, are "stable, valued, recurring patterns of behavior". Institutions can refer to mechanisms which govern the behavior of a set of individuals within a given community, and are identified with a soc ...

institution
s, procedures,
social relation In social science, a social relation or social interaction is any relationship between two or more individuals. Social relations derived from individual agency form the basis of social structure and the basic object for analysis by social scienti ...

social relation
s and
infrastructure Infrastructure is the set of fundamental facilities and systems that support the sustainable functionality of households and firms. Serving a country, city, or other area, including the services and facilities necessary for its economy to function. ...

infrastructure
s whereby parties engage in exchange. While parties may exchange goods and services by
barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distinguish ...

barter
, most markets rely on sellers offering their goods or services (including labour) in exchange for
money In a 1786 James Gillray caricature, the plentiful money bags handed to [[King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner">174x174px Money is any item or verifiable record that is generally a ...
from buyers. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate [[trade and enable the distribution and [[allocation of resources in a society. Markets allow any trade-able item to be evaluated and [[priced. A market sometimes [[emergence|emerges more or less [[spontaneous order|spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights (cf.
ownership Ownership is the state or fact of exclusive rights and control over property, which may be any asset, including an object, land or real estate, intellectual property, or until the nineteenth century, human beings. Ownership involves multiple righ ...
) of services and goods. 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 market Barcelona 2015 A black market, underground economy or shadow economy, is a clandestine market or series of transactions that has some aspect of illegality or is characterized by some form of noncompliant behavior with an institutional set o ...

black market
s, where a good is exchanged illegally, for example markets for goods under a command economy despite pressure to repress them and , such as
eBay eBay Inc. ( ) is an American multinational e-commerce corporation based in San Jose, California, that facilitates consumer-to-consumer and business-to-consumer sales through its website. eBay was founded by Pierre Omidyar in 1995, and became ...

eBay
, in which buyers and sellers do not physically interact during negotiation. A market can be organized as an
auction An auction is usually a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition exist a ...

auction
, as a , as a commodity
wholesale market Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In gener ...

wholesale market
, as a
shopping center A shopping center (American English) or shopping centre (Commonwealth English), also called a shopping complex, shopping arcade, shopping plaza or galleria, is a group of shops built together, sometimes under one roof. The first known collecti ...

shopping center
, as complex institutions such as international markets and as an informal discussion between two individuals. Markets vary in form, scale (volume and geographic reach), location and types of participants as well as the types of goods and services traded. The following is a non exhaustive list:


Physical consumer markets

* Food retail markets:
farmers' market#REDIRECT Farmers' market {{R from other capitalisation ...

farmers' market
s,
fish market :''For the Sydney station, see Fish Market tram stop.'' A fish market is a marketplace for selling fish and fish products. It can be dedicated to wholesale trade between fishermen and fish merchants, or to the sale of seafood to individual consume ...

fish market
s,
wet market A wet market (also called a public market or a traditional market) is a marketplace selling fresh meat, fish, produce, and other perishable goods as distinguished from "dry markets" that sell durable goods such as fabric and electronics. Not all ...

wet market
s and
grocery store A grocery store (North America), grocer or grocery shop (UK), is a store primarily engaged in retailing a general range of food products, which may be fresh or packaged. In everyday U.S. usage, however, "grocery store" is a synonym for supermar ...

grocery store
s * Retail marketplaces:
public markets The Old Market building in Bratislava, [[Slovakia ">Slovakia.html" style="text-decoration: none;"class="mw-redirect" title="Bratislava, [[Slovakia">Bratislava, [[Slovakia A market, or marketplace, is a location where people regularly go t ...

public markets
, [[market squares, [[Main Streets, [[High Streets, [[bazaars, [[souqs, [[night markets, shopping [[strip malls and [[shopping malls * [[Big-box stores: [[supermarkets, [[hypermarkets and [[discount stores * ''Ad hoc''
auction An auction is usually a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition exist a ...

auction
markets: process of buying and selling goods or services by offering them up for bid, taking bids and then selling the item to the highest bidder * Used goods markets such as
flea market A flea market (or swap meet) is a type of street market that provides space for vendors to sell previously-owned (second-hand) merchandise. This type of market is often seasonal. However, in recent years there has been the development of 'forma ...

flea market
s * Temporary markets such as
fair A fair (archaic: faire or fayre) is a gathering of people for a variety of entertainment or commercial activities. It is normally of the essence of a fair that it is temporary with scheduled times lasting from an afternoon to several weeks. Typ ...

fair
s *
Real estate market Real estate business is the profession of buying, selling, or renting real estate (land, buildings, or housing)."Real estate": Oxford English Dictionary online: Retrieved September 18, 2011 Sales and marketing It is common practice for an interme ...

Real estate market
s


Physical business markets

* Physical
wholesale market Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In gener ...

wholesale market
s: sale of goods or merchandise to retailers; to industrial, commercial, institutional, or other professional business users or to other wholesalers and related subordinated services * Markets for
intermediate good Intermediate goods, producer goods or semi-finished products are goods, such as partly finished goods, used as inputs in the production of other goods including final goods. A firm may make and then use intermediate goods, or make and then sell, or ...

intermediate good
s used in production of other goods and services *
Labour market Labour economics seeks to understand the functioning and dynamics of the markets for wage labour. Labour is a commodity that is supplied by labourers in exchange for a wage paid by demanding firms. Because these labourers exist as parts of a so ...

Labour market
s: where people sell their labour to businesses in exchange for a
wage A wage is the distribution from an employer of a ''security'' (expected return or profits derived solely from others) paid to an employee. Like interest is paid out to an investor on his investments, a wage is paid (from company earnings) to th ...

wage
* [[Online auction business model|Online auctions and ''Ad hoc''
auction An auction is usually a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition exist a ...

auction
markets: process of buying and selling goods or services by offering them up for bid, taking bids and then selling the item to the highest bidder * Temporary markets such as [[trade fairs * [[Energy markets


Non-physical markets

* [[Media markets (broadcast market): is a region where the population can receive the same (or similar) television and radio station offerings and may also include other types of media including newspapers and Internet content * Internet markets ([[electronic commerce): trading in products or services using computer networks, such as the Internet * Artificial markets created by regulation to exchange rights for derivatives that have been designed to ameliorate [[externalities, such as pollution permits (see [[carbon trading)


Financial markets

[[Financial markets facilitate the exchange of [[liquid assets. Most investors prefer investing in two markets: * The [[stock markets, for the exchange of shares in [[corporations ([[NYSE, [[American Stock Exchange|AMEX and the [[NASDAQ are the most common stock markets in the United States) * The [[bond markets There are also: * [[Currency markets are used to trade one currency for another, and are often used for speculation on currency exchange rates * The [[money market is the name for the global market for lending and borrowing * [[Futures markets, where contracts are exchanged regarding the future delivery of goods are often an outgrowth of general [[commodity markets * [[Prediction markets are a type of speculative market in which the goods exchanged are futures on the occurrence of certain events; they apply the market dynamics to facilitate information aggregation * [[Insurance markets * [[Debt markets


Unauthorized and illegal markets

* [[Grey markets (parallel markets): is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer * [[Black market|markets in illegal goods such as the market for [[Illegal drug trade|illicit drugs, [[arms trafficking|illegal arms, [[Copyright infringement|infringing products, cigarettes sold to minors or [[Death of Eric Garner|untaxed cigarettes (in some jurisdictions), or the private sale of un[[pasteurized [[goat milk


Mechanisms

In economics, a market that runs under [[laissez-faire policies is called a
free market In economics, a free market is a system in which the prices for goods and services are self-regulated by buyers and sellers negotiating in an open market. In a free market, the laws and forces of supply and demand are free from any intervention ...

free market
, it is "free" from the government, in the sense that the government makes no attempt to intervene through [[taxes, [[subsidy|subsidies,
minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. Beca ...
s,
price ceiling A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings ostensibly to protect consumers from conditions that could make commodit ...

price ceiling
s and so on. However, market prices may be distorted by a seller or sellers with [[monopoly power, or a buyer with [[monopsony power. Such price distortions can have an adverse effect on market participant's welfare and reduce the [[Pareto efficiency|efficiency of market outcomes. The relative level of organization and [[bargaining power|negotiating power of buyers and sellers also markedly affects the functioning of the market. Markets are a
system A system is a group of interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by its boundaries, structure and purpose and expresse ...

system
and systems have [[structure. The [[Market structure|structure of a well-functioning market is defined by the theory of [[perfect competition. Well-functioning markets of the real world are never perfect, but basic structural characteristics can be approximated for real world markets, for example: * Many small buyers and sellers * Buyers and sellers have equal access to information * Products are comparable Markets where price negotiations meet equilibrium, but the equilibrium is not [[Pareto efficiency|efficient are said to experience
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indivi ...

market failure
. Market failures are often associated with [[time-inconsistent preferences, [[Information asymmetry|information asymmetries, [[Market structure|non-perfectly competitive markets, [[principal–agent problems, [[externalities, or [[public goods. Among the major negative externalities which can occur as a side effect of production and market exchange, are [[air pollution (side-effect of [[manufacturing and [[logistics) and [[environmental degradation (side-effect of [[farming and [[urbanization). There exists a popular thought, especially among [[economists, that free markets would have a structure of a [[perfect competition. The logic behind this thought is that market failure is thought to be caused by other [[Exogeny|exogenic systems, and after removing those exogenic systems ("freeing" the markets) the free markets could run without market failures. For a market to be competitive, there must be more than a single buyer or seller. It has been suggested that two people may trade, but it takes at least three persons to have a market so that there is competition in at least one of its two sides. However, competitive markets—as understood in formal economic theory—rely on much larger numbers of both buyers and sellers. A market with a single seller and multiple buyers is a [[monopoly. A market with a single buyer and multiple sellers is a [[monopsony. These are "the polar opposites of perfect competition". As an argument against such logic, there is a second view that suggests that the source of market failures is inside the market system itself, therefore the removal of other interfering systems would not result in markets with a structure of perfect competition. As an analogy, such an argument may suggest that capitalists do not want to enhance the structure of markets, just like a [[coach (sport)|coach of a football team would influence the [[referees or would break the [[Regulation of sport|rules if he could while he is pursuing his target of winning the game. Thus according to this view, capitalists are not enhancing the balance of their team versus the team of [[consumer-[[Workforce|workers, so the market system needs a "referee" from outside that balances the game. In this second framework, the role of a "referee" of the market system is usually to be given to a [[democracy|democratic government.


Research

Disciplines such as [[sociology, [[economic history, [[economic geography and [[marketing developed novel understandings of markets studying actual existing markets made up of persons interacting in diverse ways in contrast to an abstract and all-encompassing concepts of "the market". The term "the market" is generally used in two ways: # "The market" denotes the abstract mechanisms whereby supply and demand confront each other and deals are made; in its place, reference to markets reflects ordinary experience and the places, processes and institutions in which exchanges occurs # "The market" signifies an integrated, all-encompassing and cohesive capitalist world economy.


Economics

[[Microeconomics (from Greek prefix ''mikro''- meaning "small" and economics) is a branch of economics that studies the behavior of individuals and small impacting organizations in making decisions on the allocation of limited resources (see [[scarcity). On the other hand, macroeconomics (from the Greek prefix ''makro''- meaning "large" and economics) is a branch of economics dealing with the performance, structure, behavior and decision-making of an economy as a whole, rather than individual markets. The modern field of microeconomics arose as an effort of neoclassical economics school of thought to put economic ideas into mathematical mode. It began in the 19th century debates surrounding the works of [[Antoine Augustine Cournot, [[William Stanley Jevons, [[Carl Menger and [[Léon Walras—this period is usually denominated as the [[Marginalism|Marginal Revolution. A recurring theme of these debates was the contrast between the [[labor theory of value and the [[subjective theory of value, the former being associated with classical economists such as [[Adam Smith, [[David Ricardo and [[Karl Marx (Marx was a contemporary of the marginalists). In his ''[[Principles of Economics (Marshall)|Principles of Economics'' (1890), [[Alfred Marshall presented a possible solution to this problem, using the
supply and demand In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liq ...

supply and demand
model. Marshall's idea of solving the controversy was that the [[demand curve could be derived by aggregating individual consumer demand curves, which were themselves based on the consumer problem of maximizing [[utility. The [[supply curve could be derived by superimposing a representative firm supply curves for the [[factors of production and then
market equilibrium In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. For example, in the standa ...

market equilibrium
would be given by the intersection of demand and supply curves. He also introduced the notion of different market periods: mainly [[long run and short run. This set of ideas gave way to what economists call [[perfect competition—now found in the standard microeconomics texts—even though Marshall himself was highly skeptical, it could be used as general model of all markets. Opposed to the model of perfect competition, some models of [[imperfect competition were proposed: * The [[monopoly model, already considered by marginalist economists, describes a profit maximizing capitalist facing a market [[demand curve with no competitors, who may practice [[price discrimination. * Oligopoly is a [[market form in which a market or industry is dominated by a small number of sellers. The oldest model was the [[duopoly of [[Antoine Augustin Cournot|Cournot (1838). It was criticized by [[Harold Hotelling for its instability, by [[Joseph Louis François Bertrand|Joseph Bertrand for lacking equilibrium for prices as independent variables. Hotelling built a model of market located over a line with two sellers in each extreme of the line, in this case maximizing profit for both sellers leads to a stable equilibrium. From this model also follows that if a seller is to choose the location of his store so as to maximize his profit, he will place his store the closest to his competitor as "the sharper competition with his rival is offset by the greater number of buyers he has an advantage". He also argues that clustering of stores is wasteful from the point of view of transportation costs and that public interest would dictate more spatial dispersion. * [[Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. The "founding father" of the theory of monopolistic competition is [[Edward Hastings Chamberlin, who wrote a pioneering book on the subject, ''Theory of Monopolistic Competition'' (1933). [[Joan Robinson published a book called ''The Economics of Imperfect Competition'' with a comparable theme of distinguishing perfect from imperfect competition. Chamberlin defined monopolistic competition as "challenge to traditional viewpoint of economics that competition and monopoly are alternatives and that individual prices are to be explained in terms of one or the other". He continues: "By contrast it is held that most economic situations are composite of both competition and monopoly, and that, wherever this is the case, a false view is given by neglecting either one of the two forces and regarding the situation as made up entirely of the other". [[William Baumol provided in his 1977 paper the current formal definition of a natural monopoly where “an industry in which multiform production is more costly than production by a monopoly”. [[Baumol defined a contestable market in his 1982 paper as a market where "entry is absolutely free and exit absolutely costless", freedom of entry in [[George Stigler|Stigler sense: the incumbent has no cost discrimination against entrants. He states that a contestable market will never have an economic profit greater than zero when in equilibrium and the equilibrium will also be [[Efficiency|efficient. According to Baumol, this equilibrium emerges [[endogenous variable|endogenously due to the nature of contestable markets; that is, the only industry structure that survives in the long run is the one which minimizes total costs. This is in contrast to the older theory of industry structure since not only is industry structure not [[exogenous variable|exogenously given, but equilibrium is reached without an ad hoc hypothesis on the behavior of firms, say using reaction functions in a duopoly. He concludes the paper commenting that regulators that seek to impede entry and/or exit of firms would do better to not interfere if the market in question resembles a contestable market. Around the 1970s the study of
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indivi ...

market failure
s came into focus with the study of [[information asymmetry. In particular, three authors emerged from this period: Akerlof, Spence and Stiglitz. [[Akerlof considered the problem of bad quality cars driving good quality cars out of the market in his classic "[[The Market for Lemons" (1970) because of the presence of asymmetrical information between buyers and sellers. [[Michael Spence explained that signaling was fundamental in the labour market since employers can't know beforehand which candidate is the most productive, a college degree becomes a signaling device that a firm uses to select new personnel. [[C.B. Macpherson identifies an underlying model of the market underlying Anglo-American liberal democratic political economy and philosophy in the seventeenth and eighteenth centuries: persons are cast as self-interested individuals, who enter into contractual relations with other such individuals, concerning the exchange of goods or personal capacities cast as commodities, with the motive of maximizing pecuniary interest. The state and its governance systems are cast as outside of this framework. This model came to dominant economic thinking in the later nineteenth century, as economists such as [[David Ricardo|Ricardo, [[James Mill|Mill, [[William Stanley Jevons|Jevons, [[Leon Walras|Walras and later neo-classical economics shifted from reference to geographically located marketplaces to an abstract "market". This tradition is continued in contemporary [[neoliberalism, where the market is held up as optimal for wealth creation and human freedom and the states' role imagined as minimal, reduced to that of upholding and keeping stable property rights, contract and money supply. According to [[David Harvey, this allowed for boilerplate economic and institutional restructuring under [[structural adjustment and post-Communist reconstruction. Similar formalism occurs in a wide variety of [[social democratic and [[Marxist discourses that situate political action as antagonistic to the market. In particular, [[commodification theorists such as [[György Lukács insist that market relations necessarily lead to undue exploitation of labour and so need to be opposed ''in toto''. A central theme of empirical analyses is the variation and proliferation of types of markets since the rise of capitalism and global scale economies. The [[Regulation school stresses the ways in which developed capitalist countries have implemented varying degrees and types of environmental, economic and social regulation, taxation and public spending, fiscal policy and government provisioning of goods, all of which have transformed markets in uneven and geographical varied ways and created a variety of mixed economies. Drawing on concepts of institutional variance and [[path dependence, varieties of capitalism theorists (such as Peter Hall and [[David Soskice) identify two dominant modes of economic ordering in the developed capitalist countries, "coordinated market economies" such as Germany and Japan and an Anglo-American "liberal market economies". However, such approaches imply that the Anglo-American liberal market economies in fact operate in a matter close to the abstract notion of "the market". While Anglo-American countries have seen increasing introduction of neo-liberal forms of economic ordering, this has not led to simple convergence, but rather a variety of hybrid institutional orderings. Rather, a variety of new markets have emerged, such as for [[carbon trading or rights to pollute. In some cases, such as emerging markets for water, different forms of [[privatization of different aspects of previously state run infrastructure have created hybrid private-public formations and graded degrees of commodification, commercialization, and privatization.


Marketing

Businesses market their products/services to a specific [[Market segmentation|segments of [[consumers. The defining factors of the markets are determined by demographics, interests and age/gender. A form of expansion is to enter a new market and sell/advertise to a different set of users. The marketing management school, evolved in the late 1950s and early 1960s, is fundamentally linked with the [[marketing mix framework, a business tool used in marketing and by marketers. In his paper "The Concept of the Marketing Mix", [[Neil H. Borden reconstructed the history of the term "marketing mix". He started teaching the term after an associate, James Culliton, described the role of the [[marketing manager in 1948 as a "mixer of ingredients"; one who sometimes follows recipes prepared by others, sometimes prepares his own recipe as he goes along, sometimes adapts a recipe from immediately available ingredients, and at other times invents new ingredients no one else has tried. The marketer [[E. Jerome McCarthy proposed a four Ps classification ([[Product (business)|product, [[price, [[Promotion (marketing)|promotion, [[Distribution (business)|place) in 1960, which has since been used by marketers throughout the world. Robert F. Lauterborn proposed a four Cs classification ([[consumer, [[price, [[Promotion (marketing)|promotion, [[Distribution (business)|place) in 1990 which is a more consumer-oriented version of the four Ps that attempts to better fit the movement from mass marketing to niche marketing. Koichi Shimizu proposed a 7Cs Compass Model ([[corporation, [[commodity, [[cost, [[communication, [[Marketing channel|channel, [[consumer, [[Five Ws#History|circumstances) to provide a more complete picture of the nature of marketing in 1981.


Sociology

A prominent entry-point for challenging the market model's applicability concerns exchange transactions and the ''[[homo economicus'' assumption of self-interest maximization. , a number of streams of [[economic sociology|economic sociological analysis of markets focus on the role of the social in transactions and on the ways transactions involve [[social networks and relations of [[Trust (social sciences)|trust, [[cooperation and other bonds. Economic geographers in turn draw attention to the ways exchange transactions occur against the backdrop of [[institutional, social and geographic processes, including [[social class|class relations, [[uneven development and historically contingent [[path dependency|path-dependencies. [[Pierre Bourdieu has suggested the market model is becoming self-realizing in virtue of its wide acceptance in national and international institutions through the 1990s. [[Michel Callon's concept of [[Framing (social sciences)|framing provides a useful [[Schema (Kant)|schema: each economic act or transaction occurs against, incorporates and also re-performs a geographically and cultural specific complex of social histories, institutional arrangements, rules and connections. These [[social network|network relations are simultaneously bracketed, so that persons and transactions may be disentangled from thick social bonds. The character of calculability is imposed upon agents as they come to work in markets and are “formatted” as calculative agencies. Market exchanges contain a history of struggle and contestation that produced actors predisposed to exchange under certain sets of rules. Therefore, for Challon, market transactions can never be disembedded from social and geographic relations and there is no sense to talking of degrees of embeddedness and disembeddeness. An emerging theme is the interrelationship, inter-penetrability and variations of concepts of [[persons, [[commodities and modes of exchange under particular market formations. This is most pronounced in recent movement towards [[post-structuralist theorizing that draws on [[Michel Foucault and [[Actor-network theory|Actor Network Theory and stress relational aspects of person-hood, and dependence and integration into networks and practical systems. Commodity network approaches further both deconstruct and show alternatives to the market models concept of commodities. In [[social systems theory (cf. [[Niklas Luhmann), markets are also conceptualized as inner environments of the economy. As horizon of all potential investment decisions the market represents the environment of the actually realized investment decisions. However, such inner environments can also be observed in further function systems of society like in political, scientific, religious or mass media systems.


Economic geography

A widespread trend in [[economic history and [[sociology is skeptical of the idea that it is possible to develop a theory to capture an essence or unifying thread to markets. For economic geographers, reference to regional, local, or [[commodity specific markets can serve to undermine assumptions of global integration and highlight geographic variations in the structures,
institution Institutions, according to Samuel P. Huntington, are "stable, valued, recurring patterns of behavior". Institutions can refer to mechanisms which govern the behavior of a set of individuals within a given community, and are identified with a soc ...

institution
s, histories, [[path dependency|path dependencies, forms of interaction and modes of self-understanding of agents in different spheres of market exchange. Reference to actual markets can show [[capitalism not as a totalizing force or completely encompassing [[mode of production|mode of economic activity, but rather as "a set of economic practices scattered over a [[landscape, rather than a systemic concentration of power". Problematic for market formalism is the relationship between formal capitalist economic processes and a variety of alternative forms, ranging from semi-[[feudal and [[peasant economies widely operative in many [[developing economy|developing economies, to [[informal markets,
barter In trade, barter (derived from ''baretor'') is a system of exchange in which participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distinguish ...

barter
systems, [[worker cooperatives, or [[illegal trades that occur in most developed countries. Practices of incorporation of non-Western peoples into global markets in the nineteenth and twentieth centuries did not merely result in the quashing of former social economic institutions. Rather, various modes of articulation arose between transformed and hybridized local traditions and social practices and the emergent [[world economy. By their liberal nature, so called capitalist markets have almost always included a wide range of geographically situated economic practices that do not follow the market model. Economies are thus hybrids of market and non-market elements. Helpful here is [[J.K. Gibson-Graham's complex topology of the diversity of contemporary market economies describing different types of [[Financial transaction|transactions, [[Manual labour|labour and economic agents. Transactions can occur in
black market Barcelona 2015 A black market, underground economy or shadow economy, is a clandestine market or series of transactions that has some aspect of illegality or is characterized by some form of noncompliant behavior with an institutional set o ...

black market
s (such as for [[marijuana) or be artificially protected (such as for [[patents). They can cover the sale of [[Public good (economics)|public goods under [[privatization schemes to co-operative exchanges and occur under varying degrees of [[monopoly power and state [[regulation. Likewise, there are a wide variety of economic agents, which engage in different types of transactions on different terms: one cannot assume the practices of a religious [[kindergarten, [[multinational corporation, [[state enterprise, or community-based [[cooperative can be subsumed under the same logic of calculability. This emphasis on proliferation can also be contrasted with continuing scholarly attempts to show underlying cohesive and structural similarities to different markets.Swedberg, 1994, p. 267 Gibson-Graham thus read a variety of alternative markets for [[fair trade and [[organic foods or those using [[local exchange trading system as not only contributing to proliferation, but also forging new modes of ethical exchange and economic subjectivities.


Anthropology

Economic anthropology is a scholarly field that attempts to explain human economic behavior in its widest historic, geographic and cultural scope. It is practiced by anthropologists and has a complex relationship with the discipline of economics, of which it is highly critical. Its origins as a sub-field of anthropology begin with the Polish-British founder of anthropology, [[Bronisław Malinowski, and his French compatriot, [[Marcel Mauss, on the nature of gift-giving exchange (or [[Reciprocity (cultural anthropology)|reciprocity) as an alternative to market exchange. Studies in economic anthropology for the most part are focused on exchange. Bronisław Malinowski's path-breaking work, ''[[Principles of Economics (Marshall)|Argonauts of the Western Pacific'' (1922), addressed the question "why would men risk life and limb to travel across huge expanses of dangerous ocean to give away what appear to be worthless [[wikt:trinket|trinkets?". Malinowski carefully traced the network of exchanges of bracelets and necklaces across the [[Trobriand Islands and established that they were part of a system of exchange (the [[Kula ring). He stated that this exchange system was clearly linked to political authority. In the 1920s and later, Malinowski's study became the subject of debate with the French anthropologist, Marcel Mauss, author of ''[[The Gift (Mauss book)|The Gift'' (''Essai sur le don'', 1925). Malinowski emphasized the exchange of goods between individuals and their non-altruistic motives for giving: they expected a return of equal or greater value (colloquially referred to as "[[Indian giving"). In other words, [[Reciprocity (cultural anthropology)|reciprocity is an implicit part of gifting as no "free gift" is given without expectation of reciprocity. In contrast, Mauss has emphasized that the gifts were not between individuals, but between representatives of larger collectivities. He argued these gifts were a "total prestation" as they were not simple, alienable commodities to be bought and sold, but like the "[[Crown jewels" embodied the reputation, history and sense of identity of a "corporate kin group", such as a line of kings. Given the stakes, Mauss asked "why anyone would give them away?" and his answer was an enigmatic concept, "the spirit of the gift". A good part of the confusion (and resulting debate) was due to a bad translation. Mauss appeared to be arguing that a return gift is given to keep the very relationship between givers alive; a failure to return a gift ends the relationship; and the promise of any future gifts. Based on an improved translate, [[Jonathan Parry has demonstrated that Mauss was arguing that the concept of a "pure gift" given altruistically only emerges in societies with a well-developed market [[ideology. Rather than emphasize how particular kinds of objects are either gifts or commodities to be traded in restricted spheres of exchange, [[Arjun Appadurai and others began to look at how objects flowed between these spheres of exchange. They shifted attention away from the character of the human relationships formed through exchange and placed it on "the social life of things" instead. They examined the strategies by which an object could be "[[Commodity pathway diversion|singularized" (made unique, special, one-of-a-kind) and so withdrawn from the market. A marriage ceremony that transforms a purchased [[Wedding ring|ring into an irreplaceable family [[heirloom is one example whereas the heirloom, in turn, makes a perfect gift.


Mathematical modeling

Although [[arithmetic has been used since the beginning of civilization to set prices, it was not until the 19th century that more advanced mathematical tools began to be used to study markets in the form of [[social statistics. More recent techniques include [[business intelligence, [[data mining and [[marketing engineering.


Size parameters

Market size can be given in terms of the number of buyers and sellers in a particular market or in terms of the total exchange of money in the market, generally annually (per year). When given in terms of money, market size is often termed "market value", but in a sense distinct from [[market value of individual products. For one and the same goods, there may be different (and generally increasing) market values at the production level, the wholesale level and the retail level. For example, the value of the global illicit drug market for the year 2003 was estimated by the [[United Nations to be US$13 billion at the production level, $94 billion at the wholesale level (taking seizures into account) and US$322 billion at the retail level (based on retail prices and taking seizures and other losses into account).United Nations, "2005 World Drug Report," Office on Drugs and Crime, June 2005, p. 16

/ref> File:Existing Home Sales Chart - Mar 09b.png|United States home sales (blue) File:2008 UK Book Sales Value.png|Book Sales in the United Kingdom File:LPO Market Size and Growth.png|Size and growth of the [[legal outsourcing market File:Global Mobile Applications Store Revenue.svg|Global [[Mobile app|mobiles applications market size


See also

* [[Grocery store * [[Knowledge market * [[Market economy * [[Market engineering * [[Market information systems * [[Market microstructure * [[Market town * [[Shopper marketing


References


Further reading

* [[Robert Pindyck|Pindyck, Robert S. and Daniel L. Rubinfeld, ''Microeconomics'', Prentice Hall 2012. * [[Robert H. Frank|Frank, Robert H., ''Microeconomics and Behavior'', 6th ed., McGraw-Hill/Irwin 2006. * [[Philip Kotler|Kotler, P. and [[Kevin Lane Keller|Keller, K.L., ''Marketing Management'', Prentice Hall 2011. * Baker, Michael J. and Michael Saren, ''Marketing Theory: A Student Text'', Sage 2010
online
* [[Patrik Aspers|Aspers, Patrik, ''Markets'', Polity Press 2011
online
* Bauer, Leonard and Herbert Matis (1988) ''From moral to political economy: The Genesis of social sciences'', History of European Ideas 9 (2), 125–143. * Nathaus, Klaus and David Gilgen (Eds.), ''Change of Markets and Market Societies: Concepts and Case Studies''. [[Historical Social Research 36 (3), Special Issue, 2011. {{Authority control [[Category:Market (economics)| [[Category:Financial markets|*