Imperfect competition. Perfect and imperfect competition: types, types and characteristics

Competition can only exist under a certain market condition. Different types competition (and monopoly) depend on certain indicators of market conditions. The main indicators are:

1. number of sellers and buyers;

2. nature of the product;

3. conditions for entering/exiting the market;

4. information and mobility.

The above characteristics of market structures can be briefly written down in the following table, see G. M. Gukasyan, G. A. Makhovikova, V. V. Amosova. Economic theory. - St. Petersburg: Peter, 2003.:

Perfect competition.

Let's consider character traits perfect competition.

1. The main feature of a purely competitive market is the presence of a large number of independently operating sellers, usually offering their products in a highly organized market. Examples include agricultural commodity markets, the stock exchange and the foreign exchange market.

2. Competing firms produce standardized, or homogeneous, products. At a given price, the consumer does not care from which seller the product is purchased. In a competitive market, the products of companies B, C, D, D, and so on are considered by the buyer as exact analogues of the product of company A. Due to the standardization of products, there is no basis for non-price competition, that is, competition based on differences in product quality, advertising or sales promotion.

3. In a perfectly competitive market, individual firms exercise little control over the price of products. This property follows from the previous two. Under perfect competition, each firm produces such a small portion of total output that increasing or decreasing its output will have no appreciable effect on total supply, or hence the price of the product. An individual competing manufacturer agrees to the price; competitive firm cannot set the market price, but can only adapt to it.

In other words, the individual competing producer is at the mercy of the market; the price of a product is a given value that the manufacturer has no influence on. A firm can earn the same unit price for either more or less production. Asking a higher price than the existing market price would be futile. Buyers will not buy anything from Firm A for $2.05 if its 9,999 competitors sell an identical product, or an exact substitute, for $2 each. Conversely, since Firm A can sell as much as it thinks it needs for $2 each, there is no reason for it to charge anything lower, such as $1.95. Because it would cause its profits to decrease.

4. New firms can enter freely, and existing firms- freely leave completely competitive industries. In particular, there are no serious obstacles - legislative, technological, financial and other - that could prevent the emergence of new firms and the sale of their products in competitive markets.

Imperfect competition.

Imperfect competition has always existed, but it became especially acute at the end of the 19th and beginning of the 20th centuries. in connection with the formation of monopolies. During this period, capital concentration occurs, joint stock companies, control over natural, material and financial resources. Monopolization of the economy was a natural consequence of a large leap in concentration industrial production under the influence of scientific and technological progress. Professor P. Samuelson especially emphasizes this circumstance: “The economy of large-scale production may have certain factors inherent in it that lead to the monopolistic content of business organization. This is especially true in the rapidly changing field of technological development. It is clear that competition could not last long and be effective in the sphere of countless producers.” Samuelson P. A. Economics. T.1.M.: 1993, p.54.

Most cases of imperfect competition can be explained by two main reasons. First, there is a trend toward fewer sellers in industries that have significant economies of scale and cost reductions. Under these conditions, production is cheaper for large firms, and they can sell their products at a lower price than small ones, which leads to the “crowding out” of the latter from the industry.

Second, markets tend to be imperfectly competitive when it is difficult for new competitors to enter the industry. So-called "barriers to entry" may arise as a result of government regulation limiting the number of firms. In other cases, it may simply be too expensive for new competitors to break into the industry.

In theory, there are different types of markets with imperfect competition (in order of decreasing degree of competitiveness): monopolistic competition, oligopoly, monopoly.

Let's consider the characteristic features monopolies .

1. A monopoly is an industry consisting of one firm. One company is the only manufacturer of a given product or the only provider of a service; therefore, firm and industry are synonymous.

2. From the first sign it follows that the product of a monopoly is unique in the sense that there are no good or close substitutes. From the buyer's point of view, this means that there are no acceptable alternatives. The buyer must buy the product from the monopolist or do without it.

3. We emphasized that an individual firm operating under conditions of perfect competition has no influence on the price of a product: it “agrees with the price.” This is so because it provides only a small fraction of the total supply. A clear contrast is with a pure price-dictating monopolist: the firm exercises significant control over price. And the reason is obvious: it issues and therefore controls the total supply. With a downward-sloping demand curve for its product, a monopolist can cause a change in the price of the product by manipulating the quantity supplied of the product.

4. The existence of a monopoly depends on the existence of barriers to entry. Whether they are economic, technical, legal or other, certain barriers must exist to keep new competitors from entering the industry if the monopoly is to continue to exist.

When monopolies produce a product that buyers cannot resell, they often find it possible and profitable to charge different prices to different buyers, thereby engaging in price discrimination. Price discrimination- sale of individual units of goods (services) produced at the same costs, at different prices to various buyers Gukasyan G.M., Makhovikova G.A., Amosova V.V. Economic theory. - St. Petersburg: Peter, 2003, p. 261.

Differences in price in this case reflect not so much any differences in the quality or cost of production of the goods for buyers, but rather the ability of the monopoly to arbitrarily set prices.

Depending on the method of implementation of price discrimination, it is divided into three categories (degrees).

1. Price discrimination of the first degree (perfect price discrimination) - the sale of each unit of goods at its own price, equal to the price of demand for it, leading to the seizure by the monopolist of the entire buyer's surplus.

In its pure form, perfect price discrimination is difficult to implement. Approaching it is possible in the conditions of individual production, when each unit of product is produced according to the order of a specific consumer, and prices are set under agreements with customers.

2. Price discrimination second degree- sale various volumes goods (services) according to different prices, so that the price of a unit of goods (services) is differentiated depending on the size of the lot. Price discrimination of the second degree also includes the use of cumulative discounts depending on the time of sale of goods (services).

3. Third degree price discrimination(market segmentation) - selling a unit of goods (services) at different prices in different market segments. Segmentation or division of the market into separate subgroups of buyers, each with its own special demand characteristics, allows firms to pursue a product differentiation strategy to satisfy the needs of different groups of buyers, increasing the opportunities for selling their products Gukasyan G.M., Makhovikova G.A., Amosova V. IN. Economic theory. - St. Petersburg: Peter, 2003, p.262.

The ability to engage in price discrimination is not readily available to all sellers. In general, price discrimination is feasible when three conditions are met.

1. Most obviously, the seller must be a monopolist, or at least have some degree of monopoly power, that is, some ability to control production and pricing.

2. The seller must be able to distinguish buyers in separate classes, in which each group has a different willingness or ability to pay for the product. This allocation of buyers is usually based on different elasticities of demand.

3. The original purchaser may not resell the product or service. If those who buy in the low-price portion of the market can easily resell in the high-price portion of the market, the resulting decrease in supply would increase the price in the high-price portion of the market. The policy of price discrimination would thus be undermined. This correctly means that service industries, such as the transportation industry or legal and medical services, are especially susceptible to price discrimination, see McConnell Campbell R., Brew Stanley L. Economics: Principles, Problems and Policies. In 2 vols.: Per. from English 16th ed. - M.: Republic, 1993. .

Thus, we can highlight the main pros and cons of a monopoly. The main advantage is that the scale of production allows you to reduce costs and generally save resources; The products of monopolistic companies are of high quality, which allowed them to gain a dominant position in the market. Monopolization acts to increase production efficiency: only a large firm in a protected market has sufficient funds to successfully conduct research and development. The main disadvantage is that monopolists tend to raise prices and lower production volumes; they make excessive profits and are too reluctant to take risks.

Monopolistic competition implies a market situation in which relatively big number small manufacturers offer similar but not identical products. The differences between monopolistic and pure competition are significant. Monopolistic competition does not require the presence of hundreds or thousands of firms, but a relatively small number, say 25, 25, 60 or 70.

The presence of such a number of firms implies several important signs of monopolistic competition. First, each firm has a relatively small share of the total market, so it has very limited control over the market price. In addition, the presence of a relatively large number of firms also ensures that collusion, the concerted actions of firms to limit production and artificially raise prices, is almost impossible. Finally, with the large number of firms in the industry, there is no sense of mutual dependence between them; each firm determines its policy without taking into account the possible reaction from firms competing with it. Competitive reactions can be ignored because the impact of one firm's actions on each of its many rivals is so small that those competitors would have no reason to react to the firm's actions.

Another difference between monopolistic and pure competition is product differentiation. Firms in pure competition produce standardized, or homogeneous, products; Manufacturers, under conditions of monopolistic competition, produce variations of a given product. However, product differentiation can take a number of different forms.

1. Product quality. Products may differ in their physical, or quality, parameters. Differences including features, materials, design and workmanship are critical aspects of product differentiation. Personal computers, for example, may vary in terms of hardware power, software, graphical output and the degree of their “customer focus”. There are, for example, many competing textbooks on the basics of economics, which differ in terms of content, structure, presentation and accessibility, methodological tips, graphs, drawings, etc. Any city of sufficient size has a number of retail stores selling men's and women's clothing, which differs significantly from similar clothing from stores in another city in terms of style, materials and workmanship.

2. Services. The services and terms associated with the sale of a product are important aspects of product differentiation. One grocery store can give special meaning quality of customer service. Its employees will pack your purchases and carry them to your car. A competitor represented by a big retail store may let customers pack and carry their own purchases, but sell them at lower prices. A "one-day" cleaning of clothing is often preferable to an equivalent cleaning that takes three days. The courtesy and helpfulness of store employees, the firm's reputation for serving customers or exchanging its products, and the availability of credit are service-related aspects of product differentiation.

3. Accommodation. Products can also be differentiated based on placement and availability. Small convenience or self-service grocery stores compete successfully with large supermarkets, despite having a much wider range of products and charging lower prices. Owners of small shops locate them close to customers, on the busiest streets, and they are often open 24 hours a day. For example, a gas station's close proximity to interstate highways allows it to sell gasoline at a higher price than a gas station located in a city 2 or 3 miles from such a highway could.

4. Sales promotion and packaging. Product differentiation may also result—to a large extent—from perceived differences created through advertising, packaging, and the use of brand names and trademarks. When a particular brand of jeans or perfume is associated with the name of a celebrity, it can affect the demand for these products from consumers. Many consumers believe that toothpaste packaged in an aerosol can is preferable to the same toothpaste in a regular tube. Although there are a number of medications with properties similar to aspirin, strong sales and advertising can convince many consumers that Bayer and Anacin are superior and deserve a higher price than their better-known substitutes.

One important implication of product differentiation is that, despite the presence of a relatively large number of firms, producers under monopolistic competition have a limited degree of control over the prices of their products. Consumers show preference for products from certain sellers and, within limits, pay higher prices for those products to satisfy their preferences. Sellers and buyers are no longer spontaneously connected, as in a perfectly competitive market.

From the foregoing, we can conclude that in conditions of monopolistic competition, economic rivalry focuses not only on price, but also on non-price factors such as product quality, advertising and conditions associated with the sale of the product. Because products are differentiated, it can be expected that they may change over time and that each firm's product differentiation features will be susceptible to advertising and other forms of sales promotion. Many firms place a strong emphasis on trademarks and brand marks as a means of convincing consumers that their products are better than those of competitors.

Oligopoly - market structure in which most of products are produced by a handful of large firms, each of which is large enough to influence the entire market through its own actions. Individual oligopolists can influence the price themselves, as in a monopoly, but the price is determined by the actions taken by all sellers, as in perfect competition. This makes the decisions of oligopolists more complex than the decisions of firms in other market structures. Each firm must make decisions not only about how customers will respond to its actions, but also about how other firms in the industry will respond, since their responses will affect the firm's profits.

Therefore, oligopolists have an aversion to price competition. This aversion may lead to some more or less informal type of secret price agreement. However, secret agreements are usually accompanied by non-price competition. Typically, it is through non-price competition that the market share for each firm is determined. This emphasis on non-price competition has its roots in two main reasons.

1. The firm's competitors can quickly and easily respond to price cuts. As a result, the possibility of a significant increase in someone's market share small; competitors quickly cancel out any potential sales increases in response to price cuts. And of course, there is always the risk that price competition will plunge participants into a disastrous price war. Non-price competition is less likely to get out of hand. Oligopolists believe that nonprice competition can provide more lasting advantages over competitors because product changes, improvements in production technology, and successful advertising gimmicks cannot be duplicated as quickly or as completely as price cuts.

2. Industrial oligopolists usually have significant financial resources that can be used to support advertising and product development. Therefore, although nonprice competition is a core feature of both monopolistic and oligopolistic industries, the latter typically have greater financial resources that enable them to engage more closely in nonprice competition.

Oligopolies can be homogeneous or differentiated, that is, an oligopolistic industry can produce standardized or differentiated products. Many industrial products: steel, zinc, copper, aluminum, lead, cement, industrial alcohol, etc. - are standardized products in physical sense and are produced under oligopoly conditions. On the other hand, many industries producing consumer goods: cars, tires, detergents, postcards, corn and oatmeal breakfast cereals, cigarettes and a variety of household electrical appliances are differentiated oligopolies.

In oligopolistic markets, there are usually some barriers to entry into the industry, but they are not so severe as to make it completely impossible. High barriers to entry into the industry are associated primarily with economies of scale.

Thus, we have considered competition corresponding to different market structures. In order of decreasing degree of competitiveness, they can be listed in the following order: perfect competition, monopolistic competition, oligopoly and monopoly. We found that the use of non-price competition methods in to a greater extent characteristic of firms operating under oligopoly or monopolistic competition. While in conditions of perfect competition and monopoly this need disappears. In the next chapter we will dwell in more detail on the issue of price and non-price competition.

Competition- this is a struggle between participants economic activity for better production and sales conditions. There is a distinction between perfect and imperfect competition.

Perfect competition means that with complete 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 market of perfect competition 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 (i.e., the ability to dictate terms) depends on the type of market.

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

Pure competition characterized big amount

firms producing homogeneous (identical) products, the share of each firm in the market is very small, so 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 there are close to those of a perfectly competitive market.

Pure monopoly means that there is a single company in the industry that produces a unique product that has no substitutes; entry into the industry is effectively blocked, the firm's control over price is significant, the maximum possible under market conditions. Examples include the gas, water, electricity, transport, utilities. Barriers to the entry of new participants into one or another of these industries are almost 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 where the existence of several manufacturers in the industry is impractical. An artificial monopoly is created by collusion of producers.

Along with pure monopoly, there is also pure monopsony. It occurs when there is only one buyer in the market. A monopoly benefits the seller, while a monopsony provides a privilege for the buyer. There is also a bilateral monopoly, when there is one seller and one buyer in the industry. This 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 in the domestic market is considered. However, pure monopoly and pure monopsony are quite rare.

Monopolistic competition characterized by a large number of firms producing differentiated products. Differentiated Products- These are products that satisfy the same need, but differ in quality, brand, packaging, after-sales service, etc. The market share of each firm is small, barriers to entry into the market are easy to overcome, and the ability of an individual firm to influence prices is limited within a narrow framework. Examples include the production of clothing, shoes, books, retail etc.

Oligopoly means that there are few (several) firms operating on the market that produce identical or differentiated products, the share of each firm in 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 occurred 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 they were produced by several firms;

Scientific and technological progress, i.e. development of new products, technologies, etc.;

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

Exclusive rights granted to a company by the state.

Monopolies, in an effort to maximize profits, can reduce production and raise prices for 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 antimonopoly policy.

Antimonopoly policy includes support for small and medium-sized businesses, dissemination of scientific and technical information, allowing reasonable competition from foreign firms, 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 share controlled by one firm, and mergers companies, first of all, horizontal(in the same industry) and vertical(along the technological chain from the extraction of raw materials to its processing and delivery finished products consumer);

Pursues unfair competition, for example, price collusion, purchasing the assets of one company by another through dummies, etc.

The main purpose of using public funds is to achieve the optimal combination various types competition and preventing some of them from suppressing others and thereby weakening the overall effectiveness of the competitive environment. To form 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 times of the USSR. On March 22, 1991, the RSFSR Law “On Competition and Restriction of Monopolistic Activities in Product 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 latest changes were made on July 26, 2006. The Law and amendments to it 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 aimed at suppressing unfair competition. Article 17 - to prevent monopoly and oligopolistic mergers. The extreme measure applied to business entities that abuse their dominant position is the forced separation of business entities, as defined in Article 19.

The main difficulties in applying antimonopoly legislation are to determine the scale of the market in which a firm accused of monopolism operates and to prove the fact of unfair competition.

IN modern conditions Almost every real market will be considered monopolized to one degree or another, that is, a market with imperfect competition. Imperfect competition is a market in which one or another condition of pure competition is not met.

The overwhelming majority of products in most modern markets are offered by a limited number of firms that, due to their dominant position, can influence the conditions for the sale of goods and, above all, the price level.

In total, economists distinguish four types: pure monopoly and oligopoly. The last three types are imperfect competition.

The need to study imperfect competition is explained by the fact that a significant amount of economic activity is carried out under monopolies. This problem is especially relevant for Russian economy.

Imperfect competition in the work of economists

Dedicated to competition analysis a large number of works of various economists. Adam Smith, for example, proposed the concept of “free competition,” which became the prototype. In Smith’s works, imperfect competition appeared in the form of monopolies.

Joan Robinson returns to statistical analysis imperfect and perfect competition. In her works she substantiates the relationship between the monopoly price, demand and marginal cost.

However, at present, many problems remain poorly studied, including imperfect competition in the context of world globalization.

Imperfect competition: essence and content

Competition is an integral part of a market economy. Thanks to the market, coordination of the plans of consumers and producers, more efficient use of resources, and redistribution of income in accordance with the results of activities are ensured.

But this is only possible when producers of goods compete and compete with each other.

All forms and types of competition come down to two main ones: perfect and imperfect. Perfect competition is one that meets a number of conditions:

· Large number of buyers and sellers.

· Absolute market transparency.

· The inability of individuals to influence the behavior of others.

· Uniformity of goods sold.

· Mobility of all factors of production.

· Lack of subjective control on prices by individual producers.

Modern market is an imperfectly competitive market. Competition becomes such when at least one sign of perfect competition is violated.

The degree of monopolism or imperfect competition may vary.

The first stage is monopolistic competition, in which many firms operate on the market, but each of them has a certain amount of monopoly power due to the differentiation of product quality. An example is imperfect competition in the labor market, when each candidate has his own skills and characteristics that distinguish him from all others.

The next stage is oligopoly, when several large firms have a dominant position in the market. In this case, the action of one firm will lead to retaliatory actions by all other firms.

The highest level of imperfect competition is pure monopoly. In this situation, there is only one firm operating in the industry. For example, the only airport, the only Railway in the city.

Thus, we can conclude that imperfect competition is the form of existence of almost all real markets.

Perfect competition.

In conditions of perfect competition, the market situation is characterized by polypoly, that is, a large number of buyers and sellers of the same product. Changes in the price of any seller cause a corresponding reaction only among buyers, but not among other sellers.

The market is open to everyone. Advertising campaigns are not so important and obligatory, since only homogeneous (uniform) goods are offered for sale, the market is transparent and there are no preferences. In a market with a similar structure, price is a given value. Based on the above, the following behavior options for market participants can be derived:

Price acceptor.

Although the price is formed in the process of competition among all market participants, at the same time, an individual seller does not have any direct influence on the price. If a seller asks for a higher price, all buyers will immediately move to his competitors, since in perfect competition, each seller and buyer has complete and correct information about price, product quantities, costs and demand in the market.

If the seller asks for a lower price, then he will not be able to satisfy all the demand that will be oriented towards him, due to his insignificant market share, while there is no direct influence on the price on the part of this particular seller.

If buyers and sellers act in the same way, they influence the price.

Quantity regulator.

If the seller is forced to accept the prevailing prices in the market, then he can adapt to the market by adjusting the volume of his sales. In this case, he determines the quantity he intends to sell at a given price. The buyer also only has to choose how much he wants to get at a given price.

The conditions of perfect competition are determined by the following premises:

• - a large number of sellers and buyers, none of whom has a noticeable influence on the market price and quantity of goods;
• - each seller produces a homogeneous product that is in no way distinguishable from the product of other sellers;
• - barriers to entry into the market in the long term are either minimal or completely absent;
• - there are no artificial restrictions on demand, supply or price and resources - variable factors of production - are mobile;
• - every seller and buyer has complete and correct information about price, product quantities, costs and market demand.

It is easy to see that no real market satisfies all of the above conditions. Therefore, the scheme of perfect competition has mainly theoretical significance. However, it is key to understanding more realistic market structures. And this is its value.

For market participants in conditions of perfect competition, price is a given value. Therefore, the seller can only decide how much of the product he wants to offer at a given price. This means that he is both a price acceptor and a quantity regulator.

Imperfect competition.

From the previous paragraph course work It is clear that thoroughly competitive markets allocate resources efficiently without government intervention. But this does not mean at all that actually existing market economies are effective. In practice, competition is, of course, imperfect.

Imperfect competition has always existed, but it became especially acute at the end of the 19th and beginning of the 20th centuries. in connection with the formation of monopolies. During this period, capital concentration occurs, joint-stock companies emerge, and control over natural, material and financial resources increases. Monopolization of the economy was a natural consequence of a large leap in the concentration of industrial production under the influence of scientific and technological progress. Professor P. Samuelson especially emphasizes this circumstance: “The economy of large-scale production may have certain factors inherent in it that lead to the monopolistic content of business organization. This is especially true in the rapidly changing field of technological development. It is clear that competition could not last long and be effective in the field of countless producers.”

Examples of imperfect competition are monopolistic and oligopolistic competition.

Monopolistic competition.

The name and model of this type of market arose after the publication of the book of the same name by E. Chamberlin in 1927. However, over time, the author himself, who considered oligopoly and monopolistic competition as two different types market, came to the conclusion that all types of markets located between perfect competition and monopoly contain elements of both and therefore can be combined into a wide class of markets of monopolistic competition. “Pure competition, monopolistic competition, pure monopoly,” he wrote in 1957, “this is a classification that does not seem exhaustive by the nature of the matter.” Under conditions of monopolistic competition, a large number of producers offer similar but not identical products, i.e. There are heterogeneous products on the market. Under conditions of perfect competition, firms produce standardized (homogeneous) products; under conditions of monopolistic competition, differentiated products are produced. Differentiation affects, first of all, the quality of a product or service, due to which the consumer develops price preferences. Products can also be differentiated by terms of after-sales service (for durable goods), proximity to customers, intensity of advertising, etc.

Thus, firms in the market of monopolistic competition enter into competition not only (and even not so much) through prices, but also through worldwide differentiation of products and services. Monopoly in this model lies in the fact that each firm, in conditions of product differentiation, has, to some extent, monopoly power over its product; it can raise or lower its price regardless of the actions of competitors, although this power is limited by the presence of producers of similar goods. In addition, in monopolistic markets, along with small and medium-sized ones, there are quite large firms.

In this market model, firms seek to expand their range of preferences by customizing their products. This happens, first of all, with the help of trademarks, names and advertising campaigns, which clearly highlight the differences between products.

Monopolistic competition differs from perfect polypoly in the following ways:

• - in a perfect market, not homogeneous, but heterogeneous goods are sold;
• - there is no complete transparency of the market for market participants, and they do not always act in accordance with economic principles;
• - enterprises seek to expand their area of ​​preferences by individualizing their products;
• - access to the market for new sellers under monopolistic competition is difficult due to the presence of preferences.

Oligopolistic competition.

Oligopoly is characterized by a small number of competitors - when a relatively small (within a dozen) number of firms dominate the market for goods or services. Examples of classic oligopolies: the “big three” in the USA - General Motors, Ford, Chrysler.

Oligopolies can produce both homogeneous and differentiated goods. Homogeneity most often prevails in the markets of raw materials and semi-finished products: ore, oil, steel, cement, etc.; differentiation - in consumer goods markets.

The most important feature of market relations is competition. Depending on the methods of its implementation, perfect and imperfect competition are distinguished. The conditions that determine the nature of competition include the number of sellers and buyers, the number and size of firms, the type of product, conditions for entry into and exit from the industry, availability of information, etc. However, the most important factor characterizing perfect and imperfect competition is the degree of influence of the seller or buyer at the market price.

Market structure- this is a type of market that is characterized by certain characteristic manifestations of the named conditions that predetermine the behavior of market subjects. Features of a specific market structure are also the degree of monopoly power of sellers and buyers, the level of their interdependence, and the nature of the forms and methods of competition.

Market structure is characterized perfect competition if none of the market entities (sellers or buyers) is able to significantly influence the price.

• - a large number of sellers;
• - a large number of buyers;
• - uniformity of products produced in the industry;
• - free entry into and exit from the market;
• - free flow of capital between industries;
• - equal access of economic agents to all types of information;
• - rational behavior of all market entities pursuing their own interests, their collusion in any form is impossible.

In a perfectly competitive market, buyers of homogeneous products are indifferent to which company's products they choose. Markets for vegetables and fruits (potatoes, melons, apples, etc.) are close to the state of perfect competition. Since there are a lot of buyers and sellers of homogeneous products, this means that they are all price takers, i.e. none of them can significantly affect the price.

In addition, having complete information about the characteristics of the product and its prices, as well as technologies and prices for production factors, in conditions of capital mobility, market agents instantly react to changes in market conditions, therefore, in perfectly competitive markets there is always a single price for goods and services.

A firm that sells products in a perfectly competitive market is called a competitive firm. These firms are not able to influence the price, so they act as taking the price.

The demand for the product of a perfect competitor firm is perfectly elastic, so the demand curve is horizontal line(rice. 7.1).

Rice. 7.1.

This means that a firm operating in a perfectly competitive market can sell any quantity of a good at a price R E or below it. However, at any price above the equilibrium quantity demanded for the firm's product will be zero.

At the same time, in a perfectly competitive market many sellers and buyers interact. The demand curve then has a negative slope when all possible combinations of buyer choice are shown (Figure 7.2).

A perfectly competitive firm, being a price taker, considers price as a given, independent of production volume. Therefore, when choosing the volume of output that ensures maximum profit, the firm will consider its output as a constant value.

Rice. 7.2.

Free entry into and exit from the market guarantees that there will be no agreement between producers to increase prices by reducing production volumes, since any increase in prices will attract new sellers to the market, which will increase the supply of the good. Offer a competitive market and market demand for products are equalized at the equilibrium price. The interaction between supply and demand under conditions of perfect competition in short term shown in Fig. 7.3.

Rice. 7.3.

For the entire market (as opposed to an individual firm), it has a normal form, corresponding to the law of demand. The equilibrium point (?) corresponds to the equilibrium price (P?) and the equilibrium sales volume (Q?). Equilibrium under conditions of perfect competition is stable, since the firms that form the market supply are not interested in violating it.

IN long term the balance is even more stable. This is due to the fact that entry into and exit from a completely competitive market is completely free, and the level of profitability becomes a regulator of the resources used in this industry. The free flow of capital between industries means that when changing the type of activity, the manufacturer will be able to realize the desire to move his business to another field of activity without loss. Thus, the prospect of economic profit attracts new producers to the industry, and the threat of economic losses can scare away the volume of resources used in it, moving some of them to other industries. The mechanism for forming a firm's long-term equilibrium in a perfectly competitive market is shown in Fig. 7.4.

Rice. 7.4.

competition

Suppose that in a perfectly competitive market there is an unexpected increase in demand and the demand curve shifts from position D to position Dv Then market equilibrium will be reached at the point E g at a price R g and equilibrium sales volume Q a . But in this case, firms will significantly increase their supply, as they will expect to receive higher profits. In addition, new manufacturers will enter the market. The consequence of this will be an increase in supply and a shift in the supply curve first to position S 1; and then S 2 until economic profit will not be equal to zero. Then the influx of new producers into the industry will dry up, and market equilibrium will be restored at the price P E, but with an increase in sales to the value Q 3.

A perfectly competitive market has both advantages and disadvantages. The advantages include the desire of manufacturers to reduce production costs, which is associated with the need to constantly introduce new technologies for organizing production and management. Moreover, both the company and the industry as a whole operate without shortages and overstocking, since the mechanisms of free competition maintain the market structure in an equilibrium state. Consequently, a perfectly competitive market can function without government intervention, as it is capable of self-regulation.

However, a perfectly competitive market is not without its drawbacks. The companies operating there are often small businesses that are not able to ensure the concentration of resources to achieve economies of scale and implement the most effective technology and technology. This inhibits scientific and technological progress and the rapid diffusion of innovations that are common in a market where large manufacturers have the means to finance expensive research and development activities, the results of which can be predictable in terms of commercialization.

Finally, one more important circumstance should be noted: a perfectly competitive market is an ideal model of a market structure, which in modern conditions does not function in its pure form in any industry. In the real market, in the strict sense, there are no absolutely homogeneous products (even the same shoes, but different sizes, cannot be considered as completely identical goods). As a rule, multi-product firms of different sizes operate there; the conditions of perfect competition are violated to one degree or another and market structures of imperfect competition are formed.