Perfect and imperfect competition is the definition. Summary: Competition: perfect, imperfect and market models. Monopoly in Russia. Imperfect competition as an economic phenomenon

The market mechanism operates most effectively in conditions of free, or perfect, competition, which means such a state economic system when the influence of each participant in the economic process on the general situation is so small that it can be neglected.

Perfect competition is the simplest market structure, where the market behavior of sellers and buyers is to adapt to the equilibrium state of the market environment and in which:

1) sellers accept prices as data and cannot consciously influence them;

2) access to the industry for new sellers is not limited by anything;

3) sellers do not develop a joint strategy;

4) buyers are not able to influence prices;

5) full market information is available to all traders.

The market structure in which the first four criteria are fulfilled is sometimes called pure competition. Violation of one of the main signs leads to not perfect competition... If a firm operates in perfect competition, then it cannot influence market prices, that is, it "agrees" with them.

There are three main types of imperfect competition:

Pure monopoly, when in the market one firm is the only seller of goods or services and the boundaries of the firm and the industry coincide;

Oligopoly, when there are few firms in the industry;

Monopolistic competition, which is characterized by the presence in the market of a relatively large number of firms producing differentiated products.

Monopoly comes from the Greek words "monos" - one, "full" - I sell, and arises when an individual manufacturer takes a dominant position and controls the market for a given product, for which there are no close substitutes. At first glance, such a situation is unrealistic and, indeed, it is very rare on a national scale. However, if we take a more modest scale, for example small city then we will see that the situation of pure monopoly is quite typical. In such a city there is one power plant, one railroad, one airport, one bank, one large enterprise, one bookstore, etc. In the United States, 5% of the gross product is created under conditions close to pure monopoly. In this case, the determining factor is not the size of the enterprise, but the share of its production in the output of goods on the market.

The first monopolies arose a long time ago and were associated with non-reproducible conditions of production and the ability to dictate their terms to consumers. Monopoly occurs where there are great barriers to entry into the industry. This may be due to economies of scale (as in the automotive and steel industries). There are other conditions for the formation of monopolies, such as a natural monopoly associated with irreproducible elements of production (mineral deposits, fertile land, etc.), the use of scientific and technological achievements, etc. Finally, an administrative monopoly may arise, supported by the state, subordinating the judiciary, law enforcement, state security, etc. The state creates formal barriers by issuing patents and licenses. Under US patent law, an inventor has exclusive control over his invention for 17 years.

Patents have played a huge role in the development of companies such as Xerox, Eastman Kodak, International Business Machines (IBM), Sony, etc. a factor in strengthening monopoly power. Entry into the industry is often severely restricted through the issuance of licenses. The license can be granted to both a private company and government organization(a classic example is the history of the vodka monopoly in Russia).

On the demand side, the analogue of monopoly is monopsony. This is a situation in the market where there is only one buyer. With monopoly and monopsony, sellers and buyers have the opportunity to influence the pricing process. In this case, monopoly affects the price by changing the volume of production, and monopsony - by changing the size of purchases.

Monopoly does not expand production indefinitely. She does this as long as each additional unit of production will generate an income greater than the cost of its production. The income and costs for each additional unit of production are called marginal. Monopoly expansion of production is constrained by the demand curve and rising marginal costs.

A monopolist may resort to the practice of price discrimination when he sells a product for which further resale is difficult or impossible at all, and when the monopolist has the ability to differentiate consumers who want to purchase a product in accordance with their capabilities and willingness to pay. If these conditions are met, then the monopolist divides the market into segments and sells in each of them such a quantity of his products that maximizes his profit.

Monopoly and monopsony are extreme cases of imperfect competition. Oligopoly is more common (from the Greek words: "deprived" - a little, "full" - I sell) - the bulk of goods is concentrated in a few large sellers, and oligopsony is in a few large buyers. An example of an oligopoly is the three giants of the US auto industry - General Motors, Ford Motor and Chrysler, which

together produce over 90% of all cars in the country, although at the beginning of the XX century. the number of American automobile firms was approaching 200, in the late 1920s. their number did not exceed 50.

Oligopoly is the most common type of sectoral structure in modern industry. The very threat of a potential invasion of new producers turns even a 100% monopoly into an oligopoly. A fundamentally new dilemma arises: to agree on cooperation and form a monopoly association or to compete. The essence of the oligopoly problem boils down to the interdependence of firms: when making decisions, each participant must take into account the possible reaction of competitors. Oligopoly with different strength of competition can give a result comparable to the situation of "pure" monopoly and, naturally, all intermediate options.

Oligopolies are using a new way of fighting for consumer demand - non-price competition. In this case, the struggle is based on technical production, high quality and reliability of products, more effective methods sales, use of marketing, expanding the types of services provided and guarantees to customers, improving payment terms and other techniques.

An oligopoly is characterized by universal interdependence. Oligopoly occurs when the number of firms in the industry is so small that each of them, when shaping its economic policy, is forced to take into account the reaction from competitors. Just as a chess player must take into account the possible moves of the opponent, an oligopolist must be ready for different options the development of the market situation as a result of the different behavior of competitors.

General interdependence is manifested both in the conditions of aggravated competition, and in conditions when an agreement is reached with other oligopolists and there is a tendency for the industry to turn into a purely monopoly one.

Monopoly competition combines the features of a monopoly and a market of perfect competition. Grocery stores, grocery stores, gas stations and many other retailers operate in a monopolistic competitive environment.

The essence of monopolistic competition is that each firm sells products for which there are many close but imperfect substitutes. As a result, each firm is dealing with a decreasing demand curve for its products. Differentiation can be related to the product itself (for example, different beers) or to the location of the store.

Easy entry into the industry does not mean that there are no restrictions on this. They can be product patents, licenses, trademarks, or trade marks... However, unlike pure monopoly, patents are not exclusive, since substitute goods are patented.

Economic theory... Makhovikova Galina Afanasyevna

8.2. Types of competition. Perfect and imperfect competition

Competition comes in different forms and is carried out in different ways. It can be intra-industry (between similar goods) and inter-industry (between goods of different industries).

It can be price and non-price, perfect or imperfect. Let's take a closer look at the last four types of competition.

Price competition involves the sale of goods and services at prices that are lower than those of a competitor. Reducing prices is possible either by lowering costs, or by reducing profits, which can only be afforded by large firms, or by price discrimination.

Price discrimination Is a sale certain types goods or services produced at the same cost, at different prices to different buyers. Differences in price are determined not so much by differences in product quality or costs of production, as by the ability of the monopoly to arbitrarily set prices. For example, an airline reduces the cost of air tickets when buying them back and forth; the cinema makes discounts on tickets for children, seniors or for morning sessions; the institute reduces tuition fees for needy students, etc.

Price discrimination is possible under three conditions:

The seller must be a monopoly or have some degree of monopoly power;

The seller must be able to categorize buyers into groups that have different ability to pay for the product;

The original purchaser should not be able to resell the product or service.

Price competition is often used in the provision of services (doctor, lawyer) or when transporting perishable goods from one market to another, etc.

Non-price competition is based on the sale of products of higher quality and reliability, achieved through technical excellence.

Improving product quality can be achieved:

a) either by differentiating the product itself;

b) either by differentiating the product by marketing methods;

c) either through competition of new brands.

The differentiation of the product itself means the diversity of homogeneous products by changing their design and improving the quality characteristics. These measures are aimed at winning the "loyalty" of customers, expressed in the belief of the latter that these products are "better" than competitors' products.

Product differentiation by marketing methods includes: advertising in media mass media, trial sales, sales promotion through dealers and the creation of points of sale.

The competition of new brands takes into account that in the conditions of technological progress, existing products of firms begin to quickly become obsolete. In order to remain competitive, the firm is forced to introduce new brands or remake old ones.

Depending on how the participants in market relations compete with each other, they distinguish between perfect (free) and imperfect competition and the corresponding markets: free competition and imperfect competition.

The less the influence of individual firms on the price of products, the more competitive the market is considered.

Perfect competition(free competition market) is an ideal image of competition in which:

Numerous sellers and buyers with equal opportunities and rights operate independently in the market;

The exchange is carried out with standardized and homogeneous products;

Buyers and sellers have complete information about the products they are interested in;

There is the possibility of free entry and exit from the market, and its participants have no incentive to merge.

The main feature of perfect competition: none of the firms influences the retail price, since the share of each of them in the total output is insignificant.

An increase or decrease in the number of products produced by an individual firm does not have a tangible effect on the total supply and, therefore, on prices. Moreover, no seller will be able to raise the price above the established market price without losing their customers.

Perfect competition in full is unattainable. You can only approach it. With a certain degree of conventionality, the competition that existed until about the middle of the 19th century can be considered free.

Historically and logically, following the analysis of the market for perfect competition, one should turn to the study of the market for imperfect competition. An outstanding contribution to the analysis of the market of imperfect competition was made by such economists as O. Cournot, E. Chamberlin, J. Robinson, J. Hicks and others. Perfect competition turns into imperfect when a monopolist appears on the market.

Therefore, it is useful to preface the consideration of imperfect competition with an analysis of the process of the formation of monopolies.

From the second half of the XIX century. under the influence of scientific and technological progress, there is a rapid process of concentration of production, which leads to the formation of large and super-large enterprises, that is, monopolies.

Monopoly (Greek monos - one, field - sell) arises when a separate manufacturer takes a dominant position and controls the market for a given product.

The aim of a monopoly is to obtain the maximum possible income by controlling the price or volume of production in the market. The means to an end is monopoly price, which provides profits in excess of normal.

Monopolies are formed through the merger of several companies and have the following organizational forms:

Cartel - an agreement on a quota (quantity) of products and the division of sales markets.

Syndicate is an association with the aim of organizing joint sales of products.

A trust is a monopoly that unites property, production, and sales of the products of its member firms.

The concern is a monopoly with a single financial center for all its member firms in different industries, but with a common technology.

A conglomerate is an association based on the penetration of large corporations into industries that have no production and technological connection with the sphere of activity of the parent company.

The emergence of monopolies makes competition imperfect, that is, monopolistic (the market of imperfect competition).

Imperfect competition is understood as a market in which at least one of the conditions of free competition is not fulfilled.

This condition is primarily the product differentiation that appears in an imperfect market.

Imperfect competition is divided into three types: monopoly competition with product differentiation, oligopoly, pure monopoly.

1. With monopolistic competition with product differentiation, a large number of buyers and sellers remain on the market. But a new phenomenon arises - product differentiation, that is, the product has such properties that distinguish it from similar competitors' products. These properties are: high quality product, beautiful packaging, good conditions sales, advantageous location of the store, high level of service, pretty saleswoman, etc.

Having such advantages, the owner of a differentiated product becomes, to a certain extent, a monopolist and acquires the ability to influence the price. But since the sales volume of each seller is relatively small, there are a lot of monopolistic firms and each of them has limited control over the market price - this is a distinctive feature of this type of competition. The term "product differentiation" was introduced into scientific circulation by E. Chamberlin. Monopoly power on the market, he associated primarily with the nature and characteristics of the goods sold and showed that market relations between the seller and the buyer largely depend on the nature of the product.

2. Oligopolistic competition is represented by a market dominated by several firms (Greek oligos - few, "field" - to sell). It is characterized by the presence of either homogeneous or differentiated products, and the main feature is the establishment of prices according to the principle of leadership.

This principle assumes that most firms seek to set roughly the same price as the strongest firm in the market.

The opposite phenomenon to oligopoly is oligopsony, when there are several buyers, not sellers, in the market.

3. A pure monopoly exists in the market if:

a) only one seller acts on it, who has no competitors;

b) there are no substitute products, that is, there are no close substitutes for the monopolist's product;

c) entry is blocked, that is, entry barriers are so significant that entry of new firms into the market is impossible.

Unlike perfect market, the entrance to which is free, the pure monopoly does not allow the emergence of new producers. This means that a pure monopolist seller can change the price within very wide limits, and the highest price is limited only by effective demand. This means that the monopolist will receive super profits both in the short and in the long run.

However, power over the market price can be exercised not only by the seller, but also by the buyer. This phenomenon is called monopsony ("one buy"). The problems of imperfect competition were investigated by the University of Cambridge professor Joan Robinson.

The differences between market structures are presented in table. 8.1.

In reality, only perfect or imperfect competition does not exist. As P. Samuelson noted, “ real world... acts as a kind of combination of elements of competition with imperfections introduced by monopolies "(P. Samuelson. Economics. M., 1964, p. 499).

Particular attention should be paid to natural monopolies.

Natural monopoly is a situation in which economies of scale (for example, a network railways or the country's energy economy) is so significant that the minimum costs are achieved only when the entire output of the industry is concentrated in the hands of one producer. Natural monopoly exists when economies of scale allow one enterprise to meet all market demand before returns to scale begin to decline.

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Imperfect competition is an economic phenomenon, a market model in which manufacturing firms have the opportunity to exert real influence on the price of a product. On the other hand, there is the concept of perfect competition. This economic model is a system characterized by an infinite number of buyers and sellers, homogeneous and divisible products, high mobility of production resources, equal and complete information access of all participants to the price of products, goods, the absence of any obstacles to entry and exit to the market. Violation of at least one of these conditions theoretically means imperfect competition.

It is clear that achieving conditions of pure competition is practically impossible, while imperfect competition is a widespread phenomenon.

Imperfect competition as an economic phenomenon

Based on the properties inherent in the conditional model of perfect competition, it is possible to determine which features are inherent in imperfect competition and how they manifest themselves in real market conditions.

This structure is characterized by various kinds of barriers that restrict entry to and exit from a certain market sector. There are limitations in product pricing information. The product itself is either unique, or its properties are differentiated in comparison with others, which leads to the ability of manufacturers and sellers to control prices for it: overstate, keep at a certain level. The goal is to maximize profit.

A striking example of imperfect competition is natural monopolies - firms whose activities are related to the supply of energy resources (electricity, gas) to the population. At low costs, such monopolists can set in the future any price for their products, while entry barriers to the specified market for newcomers are insurmountably high.

The characteristic features of market relations with imperfect competition are thus determined quite firmly:

Monopolies, small and medium-sized businesses are present on the market at the same time. They compete with each other, but the monopolists, to one degree or another, have an advantage in regulating prices. This applies to both buyers and sellers of the product.
In the long term, imperfect competition is aimed at monopolizing the market (sales, raw materials, labor market, etc.), in contrast to perfect competition, which is characterized by the main goal - the sale of goods.
The process of competition involves not only sales markets (retail, wholesale), but also production. Manufacturing innovation turns into a method of fighting the competition. The purpose of their implementation is to reduce production costs.
There are various methods of competitive struggle: from the use of price levers, as the most obvious ones, to non-price ones, aimed at improving the properties of goods, improving marketing and advertising policies. Non-economic methods are also used, which are commonly referred to as unfair competition.

Forms of competition for markets with imperfect competition, they have the following characteristics:

price- lowering prices for products, reducing the volume of costs in the production and marketing process, manipulating pricing, price maneuvers designed to attract a buyer;
non-price- emphasis on product quality, attracting customers through various promotions, offering a larger volume of goods or services for an equal price, non-standard advertising campaigns;
non-economic- industrial, economic espionage, bribery of responsible persons, etc.

Imperfect competition in all its diversity was considered in the works of E. Chamberlin, J. Hicks, J. Robinson, A. Cournot.

Forms of imperfect competition

Oligopoly characterized by a rather limited number of sellers of goods or services (communication services market). Oligopsony- a rather limited number of buyers (labor market in small towns). At monopolies there is only one seller on the market (gas supply). At monopsony- the only buyer (sale of heavy weapons).

At monopolistic competition there is a large number of manufacturers and sellers in the market sector selling products with similar properties, but not identical (most often found in retail, the sphere of consumer services).

Experts carry out comparative analysis these forms in the context of four market factors:

the number of sellers (producers);
differentiation of the market product;
opportunities to influence prices;
entry-exit barriers.

For example, in the case of a monopoly, there is only one quantitative indicator, prices are fully controlled, products have unique qualities, and barriers to market entry are very high, etc.

Labor market

Imperfect competition in the labor market is a complex phenomenon that includes several important factors. Note that this market sector is most susceptible to regulation in order to minimize the negative consequences of the “imperfect market”.

Labor market regulatory factors:

State. Legislatively regulates the level of wages, preventing it from completely falling under the influence of market processes (indexation of income, setting the minimum wage, etc.).
Trade union organizations. They direct their efforts to increase the level of remuneration of workers in the industry, the region, prepare and carry out the signing of agreements between trade unions and employers - market participants, in the indicated direction.
Large firms, corporations. The level of remuneration of specialists is established, which is retained for a long time. Not interested in frequent revision of the level of remuneration of employees.

Market laws work in a special way when applied to the labor market. The sale of labor, skills and abilities is fixed, as a rule, by a long-term employment contract, which gives job security to the employee, despite fluctuations in supply and demand. In addition, individual labor contract or the agreement cannot contain conditions worse than those enshrined in the collective agreement or in labor legislation.

In this case, the seller receives guarantees of employment, is withdrawn from market relations for the duration of the contract with the buyer.

The presence of restrictions on the worst terms in comparison with the collective agreement does not allow the employer to infinitely worsen the terms of individual agreements, choosing the most "accommodating" sellers. This factor is most significant if there is a lack of trade union organization.

Imperfect competition and government regulation

Imperfect competition, being far from ideal models of building the economy, has its negative sides and consequences: an increase in product prices not justified by an increase in costs, an increase in production costs themselves, a slowdown in progressive trends, a negative impact on competitiveness on the scale of world markets, and finally, a slowdown in development economy.

At the state, government, level, there are always administrative barriers for market participants, for example, exclusive rights that the state gives to a particular company.

On a note! Regulatory barriers can be expressed in more than government regulation as such, but also in the possession of the right to rare natural resources, progressive scientific and technical developments, confirmed by a patent, high level start-up capital required to enter the market sector.

At the same time, the state, realizing the global danger of market monopolization, is fighting it. Antimonopoly Regulatory Measures - a package of antimonopoly legislation that is constantly being improved, taking into account market trends. On the basis of it, administrative antimonopoly control of markets is carried out by authorized state antimonopoly structures. An effective mechanism for influencing monopolists is being developed.

Control is represented by a set of financial sanctions, the organizational mechanism does not affect the monopolists themselves, destroying them as a market phenomenon, but indirectly - by supporting small and medium-sized businesses, reducing customs duties etc. Legislative regulation often directly prohibits certain economic steps that contribute to the formation of even larger monopolies, for example, the merger of large firms in a certain market sector.

Outcomes

Imperfect competition, as opposed to a perfect, ideal model, exists in the real market structures of the modern economy. The purpose of imperfect competition is to capture the market, to monopolize it.
The forms of imperfect competition differ in the number of buyers and sellers in a given market sector. It is possible to carry out a comparative analysis of each form, paying attention to the level of barriers to entry into the market, the ability to influence prices, etc.
The labor market in conditions of imperfect competition is subject to many regulatory factors from the state, trade unions, and large companies.
The presence of an employment agreement leads to the temporary departure of the seller from the labor market, allows him to guarantee him stable employment, i.e. demand labor resources that he possesses.

Competition is an economic process aimed at interaction, interconnection and struggle between enterprises operating in the market in order to ensure all sales opportunities. own products as well as meeting the needs of consumers.

Competition functions

In the specialized literature, the following functions are distinguished, which are performed by competition:

establishment or identification of the market value of any product;
equalization of value with the distribution of the profit received, depending on labor costs for production;
distribution regulation financial resources between industries and industries.

Exists different classification this economic indicator. For example, perfect and imperfect competition. Let us dwell in this article in more detail on some types in more detail.

Varieties of competition by scale of development

Within the framework of this classification, it is necessary to distinguish the following types:

individual, in which one participant seeks to occupy a certain place in the market for choice best conditions purchase and sale of services and goods;
local, determined among sellers in the same territory;
industry (within the framework of one industry, there is a struggle to obtain maximum income);
intersectoral, expressed in the rivalry of sellers of various industries in the market for additional attraction of buyers to generate large income;
national, represented by a competition of commodity owners within one state;
global, defined as a struggle between business entities and different countries within the global market.

Types of competition in the context of the nature of development

The economic indicator by the nature of development, it is subdivided into regulated and free. Also in the economic literature you can find the following types of competition: price and non-price.

Thus, price competition can arise by artificially lowering prices for specific products. At the same time, price discrimination is widely used, which occurs when the specified product is sold at various prices, which are not justified in terms of costs.

This view competition is most often used when transporting goods or products (often it is the transportation of goods of short-term storage from one point of sale to another), as well as in the service sector.

Non-price competition is manifested mainly due to the improvement of product quality, production technologies, nanotechnology and innovation, as well as patenting of the conditions for the sale of finished products. This type of competition is based on the desire to capture a part of the market in a particular industry by releasing completely new products that are fundamentally different from analogues or by modernizing the previous model.

Characteristics of perfect and imperfect competition

This classification takes place depending on the competitive equilibrium in the market. Thus, perfect competition is based on the fulfillment of any prerequisites for equilibrium. These can include: many independent consumers and producers, free trade production factors, the independence of business entities, the comparability and homogeneity of finished products, as well as the availability of available information on the state of the market.

Imperfect competition is based on the violation of any prerequisites for equilibrium. This competition is characterized by the following properties: the distribution of the market between large enterprises limiting their independence, differentiation of finished products and control of market segments.

Competition advantages and disadvantages

Perfect and imperfect competition have their merits and demerits.

So, based on the definition of perfect competition, which shows the state of the market, where there are producers and consumers who do not affect the market price, which means that there is no reduction in demand for products with an increase in sales, the advantages include:

contributing to the achievement of compliance with the interests of market participants through the use of balanced supply and demand, achieving equilibrium prices and volume;
ensuring the efficient allocation of limited resources in accordance with the information on the pledged price;
orientation of the manufacturer to the buyer - to achieve the main goal to meet some of the economic needs of the citizen.

Thus, perfect and imperfect competition contributes to the achievement of an optimal and competitive state of the market, in which there is no profit and loss.

With the listed advantages, there are also some disadvantages of these types of competition:

the presence of equality of opportunity with the simultaneous preservation of inequality of the result;
goods that are not subject to division and piecemeal assessment in a competitive environment are not produced;
lack of consideration of different tastes of consumers.

Perfect and imperfect competition makes it possible to understand how the market mechanism works, but in fact they are quite rare. The second type of competition determines the influence of producers and consumers on the price and its changes. At the same time, the volume of finished products and the access of manufacturers to this market have some limitations.

There are the following conditions in which some types of competition (perfect and imperfect) have:

only a limited number of manufacturers should be active in a functioning market;
there are economic conditions in the form of barriers, natural monopolies, taxes and licenses for penetration into one or another production;
the market of perfect and imperfect competition in information is characterized by some distortions and is biased.

These factors can contribute to the disruption of any market equilibrium due to the limited number of producers, which establishes and subsequently maintains a fairly high prices in order to obtain high monopolistic profits. In practice, you can find the following types of competition (including perfect and imperfect): oligopoly, monopoly and monopolistic competition.

Classification of competition according to the supply and demand of goods or services

Within the framework of this classification, perfect and imperfect market competition take the following forms: oligopolistic, pure and monopolistic.

Considering the above in more detail, it can be noted that oligopolistic competition, in general, can refer to an imperfect type. The following are accepted as the key characteristics of a functioning market: a small number of competitors that have a fairly strong relationship; significant market power (the so-called reactive position and measured by the elasticity of the company's reaction to some behavior of competitors); limited number with similar products.

The conditions of perfect and imperfect competition appear for such industries as: chemical industry(production of rubber, polyethylene, oils for technical purposes and certain types of resins), machine-building and metalworking industries.

Pure competition is a kind that can be classified as perfect competition. The key characteristics of this market are the following: a significant number of both sellers and buyers without sufficient power to influence prices; undifferentiated (interchangeable) goods sold at prices that are determined by the comparison of supply and demand, as well as the absence of a kind of market power.

Market structures (perfect and imperfect competition) are widely used in industries that produce consumer goods: food and light industries, as well as the manufacture of household appliances.

There is another type of competition - monopolistic. Its main characteristics include: a large number of competitors with the balance of their forces; differentiation of goods, expressed by the consideration by the buyer of goods from the point of view of their possession of distinctive features perceived by the market.

Types of market competition (perfect and imperfect) with the help of differentiation convey the following forms: technical characteristics, drink taste, combination different characteristics... We must not forget about the increase in market power due to the differentiation of goods, which will protect the business entity and make a profit above the market average.

Market classification

The model of perfect and imperfect competition assumes the existence of competitive and non-competitive markets. As criteria for the differences between these markets, it is customary to consider the main features that are inherent to some extent to the models:

the number of enterprises in a particular industry with their size;
production of goods: of the same type (standardized) or heterogeneous (differentiated);
ease of entry into a specific industry or exit of an enterprise from it;
availability of market information to companies.

The market of perfect and imperfect competition has the following features:

the presence of a certain number of buyers and sellers for a specific type of product, while each of them can produce (buy) only a small share of the total market volume;
uniformity of goods from the point of view of buyers;
no entry barriers for a newly formed manufacturer to enter the industry, as well as free exit from it;
Availability complete information for all market participants (for example, buyers are aware of prices);
rationality in the behavior of market participants who pursue personal interests.

A firm in perfect and imperfect competition

The behavior of an enterprise depends not so much on time as on the type of competition. Considering rational behavior companies in perfect competition, the following should be noted. The goal of any business entity is to maximize profits obtained by increasing the gap between price and costs. In this case, the price should be set under the influence of supply and demand in the market. If the company significantly increases the price of its own finished products, then it may lose customers buying similar goods from a competitor. And the sales of the said business entity may significantly decrease. As for the costs, in this case, their value is determined by the technologies used by the enterprise.

Thus, any business entity is faced with the question of determining the amount of products produced and sold to maximize profits. Therefore, the enterprise has to constantly compare the market price of the product and the marginal cost of its manufacture.

An enterprise in imperfect competition

To achieve the rationality of the enterprise in the presence of imperfect competition in the market, the following conditions must be met.

In contrast to the example considered above, in conditions of imperfect competition, the manufacturer can already influence the price of his own products. If, in the conditions of functioning in the market of perfect competition, the income from the sale of products does not contain any changes (equated to market price), then in the presence of imperfect competition, an increase in sales can reduce the price, which leads to a decrease in additional income.

In addition to maximizing profits, there are other types of motivation for the activities of the enterprise:

in parallel, consider an increase in sales;
the enterprise reaches a specific level of profit, and then it is already possible not to make any efforts to maximize it.

Output

Summarizing the material presented in this article, the following should be noted. The development of competition between manufacturers leads to the allocation of large stable companies, with which it is already difficult to "compete" for other manufacturers. Rather complex barriers can arise for each newly created manufacturer who wants to occupy a certain place in a particular industry or market. In this case, we are talking about the availability of the necessary financial resources. There are also some administrative barriers, which provide for rather strict requirements for “newcomers” to the market.

Any business is conducted in a competitive environment. Competition gives rise to interaction and, at the same time, a struggle between enterprises operating in the same field.

Each market participant tries to provide for himself the most favorable working conditions in order to obtain maximum results at the lowest cost.

Competition performs several important functions at once:

determination of the market value of goods and services;
promoting the equalization of prices for goods and services, taking into account the profit and production costs;
distribution regulation Money between companies and industries.

Economists distinguish between perfect and imperfect competition. Perfect competition involves many producers of goods and services operating in the market.

With imperfect competition, the situation is often the opposite. As a rule, imperfect competition appears when at least one of the signs of perfect competition is not observed in the market.

In other words, perfect competition is based on the fulfillment of the prerequisites of equilibrium, imperfect - on the violation of the same prerequisites.

Let's take a closer look at both types of competition.

Features of perfect competition

Perfect competition is understood as a market position in which:

there are a large number of independent manufacturers and suppliers;
market participants cannot form convenient prices for goods and services, since they are regulated by consumer demand and the general level of market supply;
price dumping of market participants is practically impossible, since a decrease in value below the established market value leads to unprofitability of the business;
information about production technologies, potential profits and other aspects of doing business is available.

Various factors influence the formation of a market with perfect competition.

The main ones are:

the absence of financial and other barriers to the entry of new participants into the market;
lack of price regulation by legislatures;
high purchasing power of citizens.

Taking into account all these factors, perfect competition in its true form is not very common, because in many areas there are certain barriers or legislative regulation of prices.

Purchasing power is also a volatile and relative concept.

At the same time, the state has industries with competition close to perfect. Such an industry, for example, is the field of IT-technologies.

Characteristics of imperfect competition

Imperfect competition implies conditions opposite to those listed above. With imperfect competition, certain market participants can set the desired prices for goods and services (convenient for themselves). This is facilitated by the low saturation of the segment or a banal monopoly.

The following factors contribute to the formation of imperfect competition:

regulation of the cost of goods and services by legislative bodies;
frequent cases of dumping by leading market participants;
the presence of any obstacles to the entry of new players into the market;
uneven access of participants to product markets.

Most of the existing markets are imperfectly competitive markets.

At the same time, there are three types of such markets:

markets with pure monopoly(market control is fully carried out by one manufacturer or one group of industries);
oligopoly markets (most of the market is controlled by a few specific manufacturers);
markets with monopolistic competition (in the market, many companies produce differentiated products that are not interchangeable).

List of main differences

The main differences between perfect and imperfect competition are summarized in the following table:

Signs of perfect competition	Signs of imperfect competition
Manufacturers do not have the opportunity to set prices that are convenient for themselves, but are guided in this matter by the current laws of supply and demand.	Manufacturers set the desired prices for goods and services, taking advantage of their monopolistic position or the low saturation of the market segment in which they operate
Formed as a result of a free market environment (without government intervention in price regulation, without obstacles for new players and in the presence of citizens' solvency)	Appears in a regulated market environment (in the presence of price regulation, obstacles for new market participants). New factories often do not open due to low production margins
Dumping is practically excluded due to the fact that prices are already minimal	Dumping is often present due to the behavior of market participants

Thus, the behavior of an enterprise on the market directly depends on existing species competition.

The company determines the amount of products manufactured and the cost of their sale based on market conditions, the market value of similar goods and the cost of their manufacture. For example, if an enterprise, in conditions of perfect competition, significantly increases the prices of its products, it risks losing customers who will purchase similar goods from competing firms at a lower cost.

In case of imperfect competition, on the contrary, a company can raise prices for goods without risking being left without profit - buyers will still buy them in the absence of any alternative.