Perfect and imperfect competition, their forms, models, and hallmarks for the past several centuries have been haunting the minds of leading economists in the world.
Competition, as you know, is the most important sign of a market economy. It is a process of interaction between sellers and buyers, in which the latter have unlimited freedom of choice, and each of the sellers must prove to him that it is his option that is most acceptable.
Competition has long attracted various scientists and economists, but if before no one doubted its ability to regulate the market, in recent decades voices have been heard louder that concepts such as perfect and imperfect competition should be distinguished.
The thing is that for a long time, apologists of the so-called free market claimed that it was he who could solve all the economic problems of a particular society, determine the vector of development of the state. The core sign of such an economic model, they saw pure competition, in which the largest possible number of companies and individuals would engage in the production of a product, and each of their contribution to the total volume of production would be so insignificant that none of them could independently have a decisive influence on pricing.
In addition to the above, the characteristic of the perfect competition market implied the absence of any serious costs for advertising and promoting the product to other markets. The whole competition between producers was to be conducted exclusively at the level of price and quality of the goods. Any company at any given time had the opportunity to leave the market without any consequences for itself.
However, as history has shown, a clean market turned out to be an illusion rather than a reality. Talk that perfect and imperfect competition is equally inherent in any market, and the predominance of one form or another depends on the level of economic development of society, turned out to be nothing more than good wishes. Imperfect competition, as it turned out, played and is playing a more significant role in the life of mankind.
Currently, the following models of imperfect competition are known:
1. Competition between large monopolistic firms. This model is characteristic of the global economic space, when a particular sector was divided between large companies, each of which has every opportunity to become the sole seller in a single country. It is this model that is best suited to understanding the dilemma of perfect and imperfect competition. At the same time, if we take the entire global market as a whole, then not a single manufacturer has decisive levers that could affect pricing. A typical example is the market for sportswear and equipment.
2. Oligopoly. This model assumes that the market for certain goods or services is divided between a small number of large companies that are most likely in collusion with each other. As for prices in the context of an oligopoly, companies agree on system-forming concepts, while the cost of non-essential goods can be different. An example is the non-ferrous metal market.
3. Pure monopoly, when there is one player in this market, which determines the price, quality, and the range of goods and services. No other companies are allowed in this economic space, the manufacturer practically does not need advertising. An example is Gazprom.