Perfect and imperfect competition: types, types and characteristics. Imperfect competition Combination of perfect and imperfect competition

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

Competition functions

In 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 obtained profit depending on labor costs for production;
• regulation of the distribution of financial resources between industries and industries.

There is a different classification 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 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 to select the best conditions for the sale and purchase 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 terms of the nature of development

This economic indicator by the nature of development 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 takes place when the specified product is sold at various prices, which are not justified in terms of costs.

This type of competition is most often used in the transportation of goods or products (often it is the transportation of non-durable goods 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: a lot of independent consumers and producers, free trade in production factors, the independence of economic 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: market distribution among large enterprises with limited 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:

• promoting the achievement of matching the interests of market participants through the use of balanced supply and demand, achieving equilibrium prices and volumes;
• 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 are no profits or losses.

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

• the presence of equality of opportunity while maintaining 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.

The following conditions exist 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 this or that production;
• the market of perfect and imperfect competition in information is characterized by some distortions and is biased.

These factors can contribute to the disturbance of any market equilibrium due to the limited number of producers, which sets and subsequently maintains rather 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 is 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 are manifested for such industries as: the chemical industry (production of rubber, polyethylene, technical oils 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 force to influence prices; undifferentiated (interchangeable) goods sold at prices that are determined by the comparison of supply and demand, as well as the lack 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 the balance of their forces; differentiation of goods, expressed by the buyer's consideration of goods from the point of view of their possession of distinctive features perceived by the market.

The types of market competition (perfect and imperfect) with the help of differentiation convey the following forms: a special technical characteristic, the taste of a drink, a combination of various 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 perspective of buyers;
• the absence of entry barriers for a newly formed manufacturer to enter the industry, 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 in 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 a company in conditions of 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 an enterprise significantly increases the price of its own finished products, then it may lose buyers purchasing similar goods from a competitor. And the sales of the said business 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 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 rationality of the enterprise's behavior in the presence of imperfect competition in the market, the following conditions must be met.

Unlike 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 (equal to the market price), then in the presence of imperfect competition, the 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 an enterprise's activities:

• 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 that provide for rather strict requirements for “newcomers” to the market.

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 restrictions on 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 supplying the population with energy resources (electricity, gas). At low costs, such monopolists can set in the future any price for their products, while entry barriers to this market for newcomers are insurmountably high.

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

1. 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.
2. 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.
3. 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.
4. 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 sales 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). When monopolies there is only one seller on the market (gas supply). When monopsony - the only buyer (sale of heavy weapons).

When 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 trade, the sphere of personal services).

Experts conduct a comparative analysis of these forms in the context of four market factors:

• the number of sellers (manufacturers);
• 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 regulators:

1. State. Legislatively regulates the level of wages, preventing it from completely falling under the influence of market processes (indexation of incomes, establishment of minimum wages, etc.).
2. Trade union organizations. They direct their efforts to increase the level of wages of workers in the industry, region, prepare and implement the signing of agreements between trade unions and employers - market participants, in the indicated direction.
3. 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 apply to the labor market in a special way. The sale of labor, skills and abilities is fixed, as a rule, by a long-term employment contract, which gives employment guarantees to the employee, despite fluctuations in supply and demand. In addition, an individual labor contract or agreement cannot contain conditions worse than those enshrined in the collective agreement or in labor legislation.

In this case, the seller receives a job guarantee, is withdrawn from market relations for the duration of the contract with the buyer.

The presence of restrictions on the worst conditions 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 that is 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 not only in state regulation as such, but also in the possession of the right to rare natural resources, progressive scientific and technical developments, confirmed by a patent, and a high level of 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 more large monopolies, for example, the merger of large firms in a particular market sector.

Outcome

1. 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.
2. The forms of imperfect competition differ in the number of buyers and sellers in a given market sector. You can 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.
3. The labor market in an imperfectly competitive environment is subject to many regulatory factors from the state, trade unions, and large companies.
4. 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. the demand for the labor force that he possesses.

Competition- this is a struggle between participants in economic activity for the best conditions for production and sale. Distinguish between perfect and imperfect competition.

Perfect competitionmeans that with full mobility (mobility) of resources and goods, there are many sellers and buyers of absolutely identical products who have full market information and cannot impose their will on each other. The market of perfect competition is in fact an abstraction, since hardly even one of the real markets corresponds to the described essence. If at least one of the conditions is violated, then imperfect competition. In markets of imperfect competition, the degree of imperfection (i.e., the ability to dictate terms) depends on the type of market.

There are four main models (structures) of the market from the point of view of competition: these are pure competition, pure monopoly, monopolistic competition and oligopoly (the last three refer to imperfect competition).

Pure competition characterized by a large number

of firms producing homogeneous (identical) products, the share of each firm on the market is very small, so they cannot influence the price, there are no barriers to entry into the market. Examples are markets for agricultural products dominated by farms, foreign exchange markets, since the conditions are close to those of a market of perfect competition.

Pure monopolymeans that there is the only company in the industry that produces a unique product that has no substitutes; entry into the industry is actually blocked, the control of the company over the price is significant, the maximum possible in market conditions. Examples include the gas, water, electricity, transport, and utilities sectors. The barriers to new entrants to one or another of these industries are almost insurmountable. Monopoly is natural and artificial.

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

Along with a pure monopoly, there is also pure monopsony.It is carried out when there is only one buyer in the market. Monopoly is beneficial to the seller, and monopsony provides privilege to 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 manufacturer and one customer of these products - the state. At the same time, the situation on the domestic market is considered. However, pure monopoly and pure monopsony are rare.

Monopolistic competitioncharacterized by a large number of firms producing differentiated products. Differentiated productsAre products that satisfy the same need but differ in quality, brand, packaging, after-sales service, etc. Each firm has a small market share, barriers to market entry are easy to overcome, and the ability of an individual firm to influence prices is narrowly limited. Examples include the manufacture of clothing, footwear, books, retail, etc.

Oligopolymeans that there are few (several) firms on the market that produce the same or differentiated products, the share of each firm on the market is significant, and 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 include the metallurgical, automotive, and household appliance industries.

The transition to imperfect competition, monopolistic and oligopolistic structures took place in a market economy at the end of the 19th century. based on the concentration and centralization of production and capital as a result of competition itself. The reasons for the emergence of monopolies include:

Economies of scale: the result is 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 technological progress, i.e. mastering new products, technologies, etc .;

Exclusive ownership of any production resource, for example, establishing control over all oil fields;

Exclusive rights granted to the firm by the state.

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

A competitive market environment must be protected from the emergence of a pure monopoly or oligopoly. This can only be achieved with government intervention, through the conduct of antimonopoly policy.

Antimonopoly Policy includes support for small and medium-sized businesses, the dissemination of scientific and technical information, admission within reasonable limits of competition from foreign firms, the adoption and implementation of antitrust legislation. One of the first antitrust laws appeared in the United States in 1890 (the Sherman Act). Antimonopoly legislation covers two main areas:

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

Pursues unfair competitionfor example, price collusion, purchase of assets of one company by another through dummies, etc.

The main purpose of using public funds is to achieve an optimal combination of various types of competition and prevent some of them from suppressing others and thereby weaken the overall efficiency of the competitive environment. The formation of normally functioning competitive markets requires an appropriate legislative framework and public institutions, an 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 times of the USSR. On March 22, 1991, the RSFSR Law “On Competition and Restriction of Monopolistic Activity in Commodity Markets” was adopted, the first normative act in Russia aimed at developing competition. Changes and additions are constantly made to this law as the market situation changes. The last changes were made on July 26, 2006. The Law and its amendments 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 market position. Article 10 of the Law is focused on the suppression of unfair competition. Article 17 - on the prevention of monopoly and oligopoly mergers. An 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 laws are to determine the size of the market in which the company accused of monopoly operates and to prove the fact of unfair competition.

Imperfect competition - competition in an environment where individual producers have the ability to control the prices of the products they produce.

Features of imperfect competition

Unlike the market model of perfect competition, which is an abstraction and practically does not exist in real life, but only in theory, the market of imperfect competition is found almost everywhere. Most real markets in a modern economy are imperfectly competitive markets.

Signs of imperfect competition:

1. the presence of barriers to entry into the industry;
2. product differentiation;
3. the bulk of sales falls on one or several leading manufacturers;
4. the ability to control fully or partially the price of your products.

In conditions of imperfect competition, the equilibrium of the firm (i.e., when MC \u003d MR) occurs when the average costs do not reach their minimum level, and the price is higher than the average costs:

(MC \u003d MR)< AC < P

There are many examples of imperfect competition markets. These include the market of carbonated drinks led by the leading companies Coca-Cola and Pepsi, the car market (Toyota, Honda, BMW, etc.), the market for household appliances and electrical appliances (Samsung, Siemens, Sony), etc.

There are such types of imperfect competition as monopoly, oligopoly and monopolistic competition.

Types of imperfect competition

Table. Types of imperfect competition in the market.

Show jumpingration - This is a rivalry between participants in the market economy for the best conditions for the production, purchase and sale of goods.

Distinguish between perfect and imperfect competition

Perfect competition - this is the rivalry of numerous manufacturers creating approximately the same volumes of identical (completely replaceable) products.

Imperfect competition unlike the perfect one, it is limited by the influence of monopolies and the state.

The following models of imperfect competition are distinguished:

Competition as a factor in the marketing environment

The company operates on the market in a competitive environment. Competition - rivalry between goods and enterprises aimed at capturing the attention of potential consumers. Competition is the basis of the mechanism of commodity production and market economy. In fig. 1 shows the main difference between monopoly and competition.

Figure: 1 The difference between competition and monopoly

1. Investments in the development of small and medium-sized businesses and incentives for their organization.
2. Special customs policy.
3. Dismemberment of monopoly structures and the operation of antimonopoly legislation.

All these decisions must have a clear legislative basis.

There are several types of competitive structures, the specificity of which should be taken into account when creating and implementing marketing programs for enterprises operating in a particular type of structure.

I. occurs when an enterprise produces products for which there is no substitute.

1. Due to the fact that the company has no competitors, it completely controls the supply of these products and, as the only seller, can create barriers for potential competitors.
2. In the real world, the monopolies that still exist today are some utilities such as electricity and cable communications, and are heavily regulated by government agencies. The existence of natural monopolies is allowed, since huge financial resources are required for their development and operation; a small number of organizations can concentrate such resources in order, for example, to compete with the local electricity company.
3. The main goal of marketing under a monopoly is to control the market and maintain the uniqueness of the product.

II. occurs when a small number of suppliers control a significant proportion of the supply of products. In this case, each of the suppliers must take into account the reactions of other suppliers to changes in market activity.

1. Products produced by oligopolies can be homogeneous, such as aluminum, or differentiated, such as cigarettes and automobiles.
2. For example, due to the huge financial costs required, very few enterprises can afford to enter the refining or steel production market.
3. Some industries require a certain level of technical and marketing expertise, which is an insurmountable barrier to many potential competitors.
4. Enterprises in the oligopoly market try to avoid price wars because this approach is costly for everyone involved in the war.

III. occurs when potential competitors of a firm try to develop a differential marketing strategy in order to capture a market share.

1. There are several firms, but different marketing structures, albeit similar products.
2. Market penetration is possible as the initial costs are not very high.

3. Distinctive features of goods are important.

IV.if it existed at all, it would mean that there are a large number of sellers, none of whom can have a significant impact on price or delivery.

1. The products would be homogeneous, and there would be complete market knowledge and unhindered market entry.
2. The closest example to ideal competition is the unregulated agricultural market.
3. Very few, if any, marketing professionals operate in a purely competitive environment.
4. Pure competition is conventionally one pole of the market structure, and monopoly is the opposite.
5. Most marketers operate in a competitive environment that could be nominally placed somewhere between these two poles.
6. The market of each enterprise in this type of competition is small, demand is elastic. It is easy to penetrate this market.

Competition types:

1. Functional competition - different products can satisfy the same need.
2. Species competition - better satisfies the need for a product with higher consumer qualities.
3. Intercompany competition - the advantage in the market belongs to the one who better captured the attention of potential consumers. Success in the modern market belongs to the enterprise that was able to provide a variety of assortment of products and services offered, increase the value of consumer properties of products with a simultaneous slight increase in prices for it, focus its efforts on creating new segments and new market niches.

There are also two main groups of competition methods: price, non-price.