home Accounting Perfect and imperfect competition. Types of Market Structures

Perfect and imperfect competition. Types of Market Structures

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

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 profits received and production costs;
distribution regulation Money between companies and industries.

Economists distinguish between such concepts as perfect and imperfect competition. Perfect competition provides for the conduct of activities in the market by many producers of goods and services.

In imperfect competition, the situation is often reversed. 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 equilibrium prerequisites, imperfect competition is based on violation of the same prerequisites.

Let's look at both types of competition in more detail.

Features of perfect competition

Perfect competition is a market situation in which:

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

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

The main ones can be called:

lack of financial and other barriers to new market participants entering the market;
lack of price regulation by the legislature;
high purchasing power of citizens.

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

Purchasing power is also an unstable and relative concept.

At the same time, there are industries in the state with competition close to perfect. Such an industry, for example, is the sphere 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 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 barriers to the entry of new players into the market;
uneven access of participants to markets for products.

Most existing markets are markets with imperfect competition.

There are three types of such markets:

markets with pure monopoly (market control is completely exercised by one manufacturer or one group of industries);
markets with an oligopoly (the majority of the market is controlled by a few specific producers);
markets with monopolistic competition (in the market, many companies produce differentiated products, which 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 desired prices for goods and services, taking advantage of their monopoly position or the low saturation of the market segment in which they operate.
It is formed as a result of a free market environment (without government interference in price regulation, without obstacles for new players and in the presence of the solvency of citizens)	Appears in a regulated market environment (in the presence of price regulation, obstacles for new market participants). New enterprises often do not open due to low profitability of production
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 in the market directly depends on present type competition.

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

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

Improving production, reducing production costs, automating all processes, optimizing the structure of enterprises - all this is an important condition for development modern business. What is the best way to get businesses to do all this? Market only.

The market is understood as the competition that occurs between enterprises that produce or sell similar products. If there is a high level of healthy competition, then in order to exist in such a market, it is necessary to constantly improve the quality of the product and reduce the level of total costs.

The concept of perfect competition

Perfect competition, examples of which are given in the article, is the complete opposite of monopoly. That is, it is a market in which an unlimited number of sellers operate who deal with the same or similar goods and at the same time cannot influence its price.

At the same time, the state should not influence the market or engage in its full regulation, since this can affect the number of sellers, as well as the volume of products on the market, which is immediately reflected in the price per unit of goods.

Despite the seemingly ideal conditions for doing business, many experts are inclined to believe that perfect competition will not be able to exist in the market for a long time in real conditions. Examples that confirm their words have happened more than once in history. The end result was that the market became either an oligopoly or some other form of imperfect competition.

can lead to decline

This is due to the fact that prices are constantly decreasing. And if human resource in the world is big, here the technological is very limited. And sooner or later, enterprises will move to the fact that all fixed assets and all production processes, and the price will still fall due to the attempts of competitors to conquer a larger market.

And this will already lead to functioning on the verge of the break-even point or below it. It will be possible to save the situation only by influence from outside the market.

Key Features of Perfect Competition

We can distinguish the following features that a perfectly competitive market should have:

A large number of sellers or manufacturers of products. That is, all the demand that is on the market must be covered by more than one or several enterprises, as in the case of monopoly and oligopoly;

Products in such a market must be either homogeneous or interchangeable. It is understood that sellers or manufacturers produce such a product that can be completely replaced by products of other market participants;

Prices are set only by the market and depend on supply and demand. Neither the state, nor specific sellers or manufacturers should influence pricing. The price of a product should be determined by the level of demand as well as supply;

There should be no barriers to entry or entry into a perfectly competitive market. Examples can be very different from the small business sector, where there are no special requirements and no special licenses are needed: atelier, shoe repair services, etc.;

There should be no other influences on the market from the outside.

Perfect competition is extremely rare.

In the real world, it is impossible to give examples of perfectly competitive firms, since there is simply no market that operates according to such rules. There are segments that are as close as possible to its conditions.

To find such examples, it is necessary to find those markets in which small business mainly operates. If any firm can enter the market where it operates, and it is also easy to exit it, then this is a sign of such competition.

Examples of Perfect and Imperfect Competition

If we talk about imperfect competition, then monopoly markets are its brightest representative. Enterprises that operate in such conditions have no incentive to develop and improve.

In addition, they produce such goods and provide such services that cannot be replaced by any other product. This explains the poorly controlled, established non-market way. An example of such a market can be called a whole sector of the economy - Oil and gas industry, and Gazprom is the monopoly company.

An example of a perfectly competitive market is the provision of automotive repair services. Various service stations and car repair shops both in the city and in others settlements there is a lot. The type and amount of work performed is almost the same everywhere.

It is impossible in the legal field to artificially increase the prices of goods if there is perfect competition in the market. Examples confirming this statement, everyone saw in his life repeatedly in the ordinary market. If one seller of vegetables raised the price of tomatoes by 10 rubles, despite the fact that their quality is the same as that of competitors, then buyers will stop buying from him.

If at can influence the price by increasing or decreasing supply, then in this case such methods are not suitable.

Under perfect competition, it is impossible to raise the price on its own, as a monopolist can do.

Due to the large number of competitors, it is simply impossible to raise the price, since all customers will simply switch to purchasing the relevant goods from other enterprises. Thus, an enterprise may lose its market share, which will entail irreversible consequences.

In addition, in such markets there is a decrease in the prices of goods by individual sellers. This happens in an attempt to "win" new market shares to increase revenue levels.

And in order to reduce prices, it is necessary to spend less raw materials and other resources on the production of one unit of output. Such changes are possible only through the introduction of new technologies and other processes that can reduce the cost of doing business.

In Russia, markets that are close to perfect competition are not developing fast enough

If we talk about domestic market, perfect competition in Russia, examples of which are found in almost all areas of small business, is developing at an average pace, but it could be better. The main problem is the weak support of the state, since so far many laws are focused on supporting precisely major manufacturers which are often monopolists. In the meantime, the small business sector remains without much attention and the necessary funding.

Perfect competition, examples of which are given above, is an ideal form of competition on the part of understanding the criteria for pricing, supply and demand. To date, no economy in the world can find a market that would meet all the requirements that must be observed under perfect competition.

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

Competition features

In the specialized literature, the following functions are distinguished that competition performs:

establishing or revealing the market value of any product;
alignment of cost with the distribution of profits, depending on the cost of labor for production;
distribution regulation financial resources between industries and sectors.

There are various classifications of 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 this classification, the following types should be distinguished:

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

Types of competition in the context of the nature of development

The economic indicator according to the nature of development is divided 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 lowering the prices of specific products by artificial means. At the same time, price discrimination is widely used, which occurs when the specified product is sold at different prices that are not justified in terms of costs.

This type competition is most often used in the transportation of goods or products (often it is the transportation of non-durable goods from one outlet to another), as well as in the service sector.

Non-price competition is manifested mainly due to the improvement of product quality, production technologies, nanotechnologies and innovations, as well as patenting the terms of implementation finished products. This type of competition is based on the desire to capture a part of the market of a certain industry through the release of completely new products that are fundamentally different from analogues or by upgrading the old 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 equilibrium prerequisites. These may include: many independent consumers and producers, free trade production factors, independence of business entities, comparability and homogeneity of finished products, as well as the availability available information about 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 with the limitation of their independence, differentiation of finished products and control of market segments.

Advantages and disadvantages of competition

Perfect and imperfect competition have their advantages and disadvantages.

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

facilitating the achievement of compliance with the interests of market participants by using a balanced supply and demand, achieving an equilibrium price and volume;
ensuring 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 contribute to the achievement of an optimal and competitive state of the market, in which there is no profit or loss.

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

the presence of equality of opportunity while maintaining inequality of outcome;
benefits that are not subject to division and individual evaluation in a competitive environment are not produced;
lack of consideration for the different tastes of consumers.

Perfect and imperfect competition provide insight into how the market mechanism works, but are actually 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 access of manufacturers to this market has some limitations.

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

in a functioning market, only a limited number of producers should operate;
take place economic conditions in the form of barriers, natural monopolies, taxes and licenses to enter a particular industry;
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 monopoly profits. In practice, you can meet the following types of competition (perfect and imperfect including): oligopoly, monopoly and monopolistic competition.

Classification of competition according to the demand and supply 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 form. As key features functioning market are accepted: a small number of competitors who have a fairly strong relationship; significant market power (the so-called reactive position and measured by the elasticity of the enterprise's response to some behavior of competitors); limited number with the similarity of goods.

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

Pure competition is a kind that can be classified as perfect competition. The key characteristics of this market are as follows: a significant number of both sellers and buyers without sufficient power to influence prices; undifferentiated (interchangeable) goods sold at prices that are determined by comparing 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 industry, 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 a balance of their forces; the differentiation of goods, expressed by the buyer's consideration of goods in terms 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 specification, the taste of the drink, a combination of different characteristics. We should 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 average market.

Market classification

The model of perfect and imperfect competition assumes the existence of competitive and competitive markets. As criteria for the difference between these markets, it is customary to consider the main features that are characteristic to some extent of 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 particular industry or the exit of an enterprise from it;
availability of market information to companies.

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

a certain number of buyers and sellers for specific type goods, while each of them can produce (buy) only a small share of the total market volume;
homogeneity of goods from the point of view of buyers;
the absence of entry barriers for entry into the industry of a newly formed manufacturer, as well as free exit from it;
availability of 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 under perfect and imperfect competition

The behavior of an enterprise depends not so much on time as on the type of competition. Considering the rational behavior of the company in conditions of perfect competition, it is necessary to note the following. 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, it may lose buyers who purchase similar products from a competitor. And the sales of the specified economic entity may decrease significantly. As for the costs, in this case their value is determined by the technologies used by the enterprise.

Thus, any business entity faces the question of determining the quantity of produced and sold products in order to obtain maximum profit. Therefore, the company has to constantly compare the market price of products and the marginal cost of its manufacture.

An enterprise in conditions of imperfect competition

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

In contrast to the above example, under 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 (equals to the market price), then in the presence of imperfect competition, sales growth 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:

simultaneously consider and increase sales;
achievement by the enterprise of a certain level of profit, and then it is already possible not to make any efforts to maximize it.

Conclusion

Summing up the material presented in this article, it is necessary to note the following. The development of competition between manufacturers leads to the separation of large stable companies, with which it is already difficult for other manufacturers to “compete”. Before each newly created manufacturer who wants to take a certain place in a particular industry or market, there may be quite complex barriers. In this case we are talking on the availability of the necessary financial resources. There are also some administrative barriers that provide for rather stringent requirements for "newcomers" to the market.

Competition is a struggle between the participants economic activity behind Better conditions production and marketing. Distinguish between perfect and imperfect competition.

Perfect Competition means that with full mobility (mobility) of resources and goods, there are many sellers and buyers of absolutely identical products who have complete market information and cannot impose their will on each other. The perfect competition market is actually an abstraction, since it is unlikely that at least one of the real markets corresponds to the described essence. If at least one of the conditions is violated, then imperfect competition. In imperfectly competitive markets, the degree of imperfection (ie, the ability to dictate one's own terms) depends on the type of market.

There are four main models (structures) of the market in terms of competition: these are pure competition, pure monopoly, monopolistic competition and oligopoly (the last three are imperfect competition).

Pure competition characterized by a large number

firms producing homogeneous (identical) products, the share of each firm in the market is very small, therefore they cannot influence the price, there are no barriers to entry into the market. Examples include markets for agricultural products under the dominance of farms, foreign exchange markets, since the conditions on them are close to the conditions of a perfectly competitive market.

Pure monopoly means that there is only one firm in the industry that produces a unique product that has no substitutes; the entrance to the industry is actually blocked, the firm's control over the price is significant, the maximum possible in market conditions. Examples include gas, water, electricity, transport, utilities. Barriers to entry of new participants in one or another of these industries are practically insurmountable. Monopoly can be natural or artificial.

A natural monopoly occurs either when the production of a product requires unique natural conditions, or in the case when the existence of several manufacturers in the industry is impractical. An artificial monopoly is created by the collusion of producers.

Along with pure monopoly, there is also pure monopsony. It occurs when there is only one buyer in the market. Monopoly benefits the seller, while monopsony benefits the buyer. There is also a bilateral monopoly, when there is one seller and one buyer in the industry. Such a situation, for example, is possible in the production of military products, when there is one manufacturing company and one customer of this product - the state. It considers the situation in domestic market. However, pure monopoly and pure monopsony are quite rare.

Monopolistic competition characterized by a large number of firms producing differentiated products. Differentiated products is a product that satisfies the same need, but differs in quality, trademark, packaging, after-sales service, etc. The market share of each firm is small, barriers to entry are easily overcome, and the ability of an individual firm to influence prices is narrowly limited. Examples are the production of clothing, shoes, books, retail etc.

Oligopoly means that there are few (several) firms on the market that produce the same or differentiated products, the share of each firm in the market is significant, it is difficult to enter the industry. An oligopoly is characterized by a significant influence of an individual firm on the prices of goods and strong interdependence firms in their market behavior. Examples are the metallurgical industry, the automotive industry, and the production of household appliances.

The transition to imperfect competition, monopolistic and oligopolistic structures occurred in market economy in late XIX in. based on the concentration and centralization of production and capital as a result of competition itself. The reasons for the emergence of monopolies include:

Scale effect: as a result, there are natural monopolies- industries in which the existence of a single firm is economically rational, since products can be produced by one firm at lower average costs than if it were produced by several firms;

Scientific and technical progress, i.e. development new products, technology, etc.;

Exclusive ownership of some productive resource, for example, establishing control over all oil fields;

Exclusive rights granted to the firm by the state.

Monopolies, seeking to maximize profits, may reduce production and raise prices for goods, which is contrary to the interests of buyers and society as a whole.

The competitive market environment must be guarded against the emergence of a pure monopoly or oligopoly. This can be achieved only with the intervention of the state, through the conduct of antimonopoly policy.

Antitrust policy includes support for small and medium-sized businesses, the dissemination of scientific and technical information, the assumption of reasonable competition from foreign firms, the adoption and implementation of antitrust laws. One of the first antitrust laws appeared in the USA in 1890 (Sherman law). Antitrust law covers two main areas:

Regulates the structure of the industry - market share controlled by one firm, and mergers firms, primarily horizontal(in one industry) and vertical(along the technological chain from the extraction of raw materials to its processing and delivery of finished products to the consumer);

haunts unfair competition, for example, collusion on prices, buying up the assets of one company by another through nominees, etc.

The main purpose of the application public funds is to achieve the optimal combination various kinds competition and avoiding that some of them suppress others and thereby weaken the overall effectiveness of the competitive environment. For the formation of normally functioning competitive markets, appropriate the legislative framework and public institutions, effective monetary policy, measures to protect the interests of national producers in the world market. In modern Russian conditions the problem of protecting the competitive environment is quite acute, since the monopoly in many industries has been preserved since the days of the USSR. On March 22, 1991, the Law of the RSFSR “On Competition and Restriction of Monopoly Activities on commodity markets", first normative act in Russia, aimed at developing competition. This law is constantly being amended and supplemented as the market situation changes. The latest amendments were made on July 26, 2006. The Law and its addenda define the concepts of monopoly high and low prices, the concept of “dominant position” of an economic entity, etc. The law prohibits such entities from abusing their position in the market. Article 10 of the Law is focused on the suppression of unfair competition. Article 17 - to prevent monopoly and oligopolistic mergers. The extreme measure applied to business entities abusing their dominant position is the forced separation of business entities, as defined in Article 19.

The main difficulties in applying antitrust law are to determine the size of the market in which the company accused of monopoly operates and to prove the fact of unfair competition.