Fragmented Market

A fragmented market is one in which multiple equilibrium prices emerge due to various barriers that disrupt the free interaction of supply and demand. Such fragmentation can stem from a range of factors, including:

• High transportation costs. Excessive transportation expenses can limit physical access to goods.
• Regulatory constraints. Market exchanges may be obstructed by political barriers, such as regulations or tariffs.
• Imperfect information. Market participants may lack sufficient information to engage in efficient transactions.
• Diverse consumer preferences. Significant variations in consumer preferences can drive firms to pursue micro-segmentation strategies.

These separating factors inhibit open competition and lead to the coexistence of multiple equilibrium prices within the same local market. By contrast, in a global market - where consumer preferences and product characteristics are largely homogeneous - a single equilibrium price tends to prevail worldwide.