Perfect competitive market. General characteristics of the market of perfect competition

2. In an effort to minimize irretrievable losses and capture the most consumer surplus, monopolists and oligopolists resorts to price discrimination - assigning different prices for the same product to different buyers depending on demand. To do this, the seller must have the necessary mass marketable products D(c), able to meet the demand of a group of buyers with low solvency. And also this product should be unsuitable for long-term storage and accumulation, because otherwise a buyer appears who purchases the product at a low price with the aim of subsequent resale at a high one.

The most important condition is the possibility of separating consumer groups according to their ability to pay by charging different fees for the same product. The process of price discrimination is one of the forms of redistribution of funds, therefore price discrimination is prohibited by the antitrust laws of most developed countries.

Since the prices of monopoly products are high, it happens that enterprises sell their goods and services on credit. And this always translates into the desire of consumers to delay payments for consumed products. Thus, the consequences of monopoly behavior are not only in reducing production volumes, but also in creating the preconditions for the development of a non-payment crisis. The spread of non-payments is the result of price discrimination of economic structures that have influence on the market and are not constrained in their activities by the regulatory influence of the state.

Also, the need to regulate prices in natural monopolies and, to a lesser extent, in oligopolies, is also due to the fact that the mechanism of influencing the economy through a system of regulated prices is an effective addition to fiscal macroeconomic policy.

Tasks of state regulation

We looked at why the state needs to regulate the activities of oligopolies and monopolies. But what can the state achieve by "managing" firms operating in an imperfectly competitive market? By regulating the activities of oligopolies and monopolies, the state can create a financial situation that is attractive to creditors and investors, offer buyers more or less affordable prices for monopoly products; it is possible to develop a new tariff grid based on the principles of fair and efficient allocation of costs to tariffs for various types of consumers. Also, the state can stimulate monopoly enterprises to reduce costs and excessive employment, improve the quality of service, increase the efficiency of investments, etc.; can use the possibilities of price regulation mechanisms in pursuing a stabilizing macroeconomic policy, can manage the development of the economy in the regions. For example, if we formulate regional problems that can be solved with the help of tariffs for electricity and thermal energy, then they are as follows:

Alignment or differentiation of tariffs by subjects Russian Federation in order to ensure their uniform development;

Management of modes of electricity and heat consumption;

Stabilization economic situation energy facilities and their associations in case of an unplanned decrease in energy demand in advance;

Stimulating an increase or decrease in demand for energy by individual consumers or groups of consumers and, accordingly, the regulation of their economic activity.

As we can see, the range of problems solved with the help of state regulation of imperfect competition markets is very wide, which means that this type of state activity is important for the normal functioning of our society.

Types of state regulation of markets

Let's start with taxes. This method is not economically viable, since most of the time the tax burden falls on the buyers. For example, consider the introduction of a commodity tax, which is officially paid by the seller.

Consequently, the new equilibrium began to be characterized by three quantities: Q’, P’, P”. And the total amount of tax received by the state budget will be equal to the area of ​​the rectangle P’ABP.” It is worth noting that part of the "tax burden" rests with the buyer. It turns out that the introduction of a commodity tax causes a reduction in the equilibrium size of the market, and also leads to an increase in the price actually paid by buyers and a decrease in the price actually received by sellers.

In markets of imperfect competition, the state, when setting a price ceiling, usually sets a price below the equilibrium price. In this case, we get a situation of shortage of goods, the difference between the available and required amount of goods the state can cover by paying extra to producers from tax revenues (which is what happens in the Moscow Metro).

Another situation is also possible. Let the government set a price ceiling below the equilibrium price, and producers have an illegal opportunity to sell their goods at a higher price on the black market (in case of exposure, sanctions apply only to sellers).

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What is pure competition? Description and definition of the concept.

Pure competition- these are prosperous conditions in the market, when there are many buyers and many sellers, and there is also a complete lack of monopoly.
When there is no barrier to entry or exit from the market, information about the quality and price of the product is available to all market participants.

A large number of consumers and an abundance of goods cannot affect the price and quantity of products. Both the seller and the consumer depend on the dynamics of the market.

In order to have a higher profit from the sale of products or goods, this is to use some advanced technologies, both in the manufacture of products and in their sale, which will cause a decrease in cost, and hence there will be an increase in profits.

Pure, perfect, free competition is an idealized state of the market, an economic model, when individual sellers and buyers cannot influence the price, but form it with their contribution of supply and demand. That is, it is this kind market structure, where the market behavior of buyers and sellers lies in the adaptation to the equilibrium state of market conditions.

Let us consider, in more detail, what pure competition means.

Features of pure competition

Features of perfect competition:

• divisibility and homogeneity of products sold. It is understood that sellers or manufacturers produce such a product that can be completely replaced by products of other market participants;
• an infinite number of equal buyers and sellers. 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;
• high mobility of production factors. Neither the state, nor specific sellers or manufacturers should influence pricing. The price of goods should determine the cost of production, the level of demand, as well as supply;
• no barriers to exit or entry to the market. Examples may be the most various areas small businesses that do not have special requirements and do not need special licenses or other permits. These include: atelier, shoe repair shop and similar establishments;
• full and equal access of all participants to information (on the price of goods).

In a situation where at least one feature is missing, competition is imperfect. In a situation where these signs are removed artificially in order to occupy a monopoly position in the market, the situation is called unfair competition.

One of the widely used types of unfair competition in some countries is the giving of bribes, implicitly and explicitly, to various representatives of the state in exchange for various kinds of preferences.

David Ricardo revealed a tendency, natural in conditions of absolute competition, to reduce the economic profit of each seller.

The exchange market in a real economy is most like a market of perfect competition. Keynesians, while observing the phenomena of economic crises, came to the conclusion that this form of competition usually suffers a fiasco, which can be overcome only with the help of external intervention.

Improving production, reducing production costs, automating all processes, optimizing the structure of enterprises - all this is important condition development of modern business.

What is the best incentive for businesses to do this? exclusively and only market. The market, in this sense, is a competition that arises between enterprises that manufacture or sell similar products.

In the case when there is a sufficiently high level of adequate competition, this seriously affects the quality of goods or services sold on the market.

Because every manufacturer wants to be the best, so he is interested in having the highest quality products and the lowest production costs. This is a condition for existence in a competitive market.

Perfect competition in the market

Perfect competition, as mentioned above, is the absolute opposite of monopoly.

In other words, this is a market in which an unlimited number of sellers operate who sell the same or similar goods and at the same time cannot influence its final cost in any way.

The state, in turn, 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 will instantly affect the cost per unit of production (goods or services).

However, unfortunately, such ideal conditions for doing business in real market conditions cannot exist for a long time. That is, perfect competition is a fickle and temporary phenomenon. Ultimately, the market becomes either an oligopoly or some other form of imperfect competition.

Perfect competition can lead to decline. This may be due to the fact that in the long run there is a constant decrease in prices. The human resource in the world is quite large, while the technological one is very limited.

Over time, all enterprises will gradually undergo a process of modernization of all fixed production assets and all production processes, and the price will still continue to 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 market only by outside influence.

Perfect competition is extremely rare. In the real world, it is impossible to give examples of perfectly competitive firms, since there simply is no market that functions in this way. Although there are some 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. As already mentioned, if any firm can enter the market where this segment operates, and also easily leave it, then this is a sign of perfect 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.

An entire sector of the economy can be called an example of such a market - the oil and gas industry, and Gazprom is a monopoly company. An example of a perfectly competitive market is the automotive repair industry. There are a lot of all kinds of service stations and auto repair shops, both in the city and in other settlements.

Almost everywhere the same services are provided, and approximately the same amount of work is performed. If there is perfect competition in the market, then it becomes impossible to artificially increase the prices of goods in the legal field. We see examples of this in everyday life, in ordinary markets.

For example, one fruit seller raised the price of apples by 10 rubles, although their quality is the same as that of competitors, in this case, buyers will not buy goods from him at that price. If the monopolist has influence on the price by raising or lowering it, then in this case such methods are not suitable.

Under perfect competition, it is impossible to raise the price on its own, unlike a monopoly enterprise. Because of the competition in the market, you can't just raise the price, as all customers will be looking for a better deal. Thus, an enterprise can lose its market share, and this will entail disastrous consequences.

Some people reduce the cost of the goods offered. This is done in order to “win back” new market shares and increase revenue levels. To reduce prices, it is necessary to reduce the cost of raw materials.

And this, in turn, is possible due to the use of new technologies, production optimization and other processes, which allow saving costs on raw materials. In Russia, markets that are close to perfect competition are not developing fast enough.

Examples of a perfect economy can be found in almost all areas of small business. If we talk about the domestic market, we can see that a perfect economy in it is developing at an average pace, but it could be better.

Weak support from the state significantly hinders its development, since so far many laws are focused on supporting large producers, which in turn are monopolists.

Therefore, the small business sector remains without special attention and without adequate funding.

Perfect competition, examples of which are listed above, is an ideal form of competition from the understanding of pricing, supply and demand criteria. Nowadays, not a single country, not a single economy in the world, can boast of such a market that would meet absolutely all the requirements that a market must meet with perfect competition.

We briefly considered what pure competition is, its distinctive features, as well as examples in the global market. Leave your comments or additions to the material.

Competition(lat. concurrentia, from lat. concurro - running away, colliding) - struggle, rivalry in any area. In economics, it is a struggle between economic entities for the most efficient use of factors of production.

Competitiveness- the ability of a certain object or subject to outperform competitors in given conditions.

The lower the firm's ability to influence the market, the more competitive the industry is considered to be. In the limiting case, when the degree of influence of one firm is equal to zero, one speaks of a perfectly competitive market.

In the scientific language, there are two different understandings of the term “competition”. Competition as a characteristic of the market structure (market competitiveness, perfect, monopolistic competition) and competition as a way of interaction between firms in the market (competition, price and non-price competition).

The terms used to refer to various types of market structures come from the Greek language and characterize, on the one hand, the belonging of economic entities to sellers or buyers (poleo - sell, psoneo - buy), and on the other hand, their number (mono - one, oligos - a few, poly - a lot).

Since the structure of a particular market is determined by many factors, the number of market structures is practically unlimited.

To simplify the analysis in economic theory, it is customary to distinguish four basic models:

• perfect competition;
• pure monopoly;
• monopolistic competition;
• homogeneous and heterogeneous oligopoly

Perfect Competition

Perfect competition is a state of the market in which there are a large number of buyers and sellers (manufacturers), each of which occupies a relatively small share of the market and cannot dictate the conditions for the sale and purchase of goods.

It is supposed to have the necessary and accessible information about prices, their dynamics, sellers and buyers not only in this place, but also in other regions and cities.

The market of perfect competition implies the absence of the power of the producer over the market and the setting of the price not by the producer, but through the function of supply and demand.

Features of perfect competition are not inherent in any of the industries in full. All of them can only approach the model.

The features of an ideal market (market of perfect competition) are:

1. the absence of entry and exit barriers in a particular industry;
2. no restrictions on the number of market participants;
3. homogeneity of similar products presented on the market;
4. free prices;
5. lack of pressure, coercion from some participants in relation to others

Creating an ideal model of perfect competition is an extremely complex process. An example of an industry close to a perfectly competitive market is agriculture.

Imperfect Competition

Imperfect competition - competition in conditions where individual producers have the ability to control the prices of the products they produce. Perfect competition is not always possible in the market. Monopolistic competition, oligopoly and monopoly are forms of imperfect competition. With a monopoly, it is possible for the monopolist to crowd out other firms from the market.

Signs of imperfect competition are:

1. dumping prices
2. creation of entry barriers to the market of any goods
3. price discrimination (selling the same product at different prices)
4. use or disclosure of confidential scientific, technical, industrial and trade information
5. dissemination of false information in advertising or other information regarding the method and place of manufacture or quantity of goods
6. omission of important consumer information

Losses from imperfect competition:

1. unjustified price increase
2. increase in production and distribution costs
3. slowdown in scientific and technological progress
4. decrease in competitiveness in world markets
5. decline in the efficiency of the economy.

Monopoly

A monopoly is an exclusive right to something. With regard to the economy - the exclusive right to manufacture, purchase, sell, owned by one person, a certain group of persons or the state.

Arises on the basis of high concentration and centralization of capital and production. The goal is to extract ultra-high profits. Provided by setting monopoly high or monopoly low prices.

Suppresses competitive potential market economy leads to rising prices and disproportions.

Monopoly Model:

• sole seller;
• lack of close substitute products;
• dictated price.

A natural monopoly should be distinguished, that is, structures whose demonopolization is either impractical or impossible: public utilities, subway, energy, water supply, etc.

Monopolistic competition

Monopolistic competition occurs when many sellers compete to sell a differentiated product in a market where new sellers can enter.

A market with monopolistic competition is characterized by the following:

1. the product of each firm trading in the market is an imperfect substitute for the product sold by other firms;
2. there are a relatively large number of sellers in the market, each of which satisfies a small but not microscopic share of the market demand for a common type of product sold by the firm and its rivals;
3. sellers in the market do not consider the reaction of their rivals when choosing what price to set their goods or when choosing annual sales targets;
4. the market has conditions for entry and exit

Monopolistic competition is similar to a monopoly situation in that individual firms have the ability to control the price of their goods. It is also similar to perfect competition, since each product is sold by many firms, and there is free entry and exit in the market.

Oligopoly

Oligopoly is a type of market in which not one, but several firms dominate each sector of the economy. In other words, there are more producers in an oligopolistic industry than in a monopoly, but significantly fewer than in a perfect competition.

As a rule, there are 3 or more participants. A special case of an oligopoly is a duopoly. Price controls are very high, barriers to entry into the industry are high, and there is significant non-price competition. Examples include mobile operators and the housing market.

Antitrust policy

In all developed countries In the world there is antimonopoly legislation that restricts the activities of monopolies and their associations.

The antimonopoly policy in European countries is more aimed at regulating already established monopolies, regardless of how they achieved their monopoly position, and this regulation does not imply structural changes, that is, it does not contain requirements for deconcentration, splitting firms into independent enterprises.

First of all, and of course, the US state antimonopoly policy is characterized by such a position, according to which it is not at all necessary to deprive a company of monopoly high profits if it has achieved a monopoly position in the market "thanks to superior business qualities, ingenuity, or simply a lucky chance."

In addition to price regulation, reforming the structure of natural monopolies can also bring certain benefits - especially in Russia.

The fact is that in Russia, within the framework of a single corporation, both the production of natural monopoly goods and the production of goods that are more efficient to produce under competitive conditions are often combined.

This association is, as a rule, the nature of vertical integration. As a result, a giant monopoly is formed, representing a whole sphere of the national economy.

In general, the system of antimonopoly regulation in Russia is still in its infancy and requires radical improvement. In Russia, the body of antimonopoly regulation is the Federal Antimonopoly Service of Russia.

Objects with competitiveness can be divided into four groups:

• products,
• enterprises (as producers of goods),
• industries (as a set of enterprises offering goods or services),
• regions (districts, regions, countries or their groups).

In this regard, it is customary to talk about its types such as:

• National Competitiveness
• Product competitiveness
• Enterprise competitiveness

In addition, it is fundamentally possible to distinguish four types of subjects that evaluate the competitiveness of certain objects:

• consumers,
• manufacturers,
• investors,
• state.

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Perfect and imperfect competition: essence and characteristics

Evgeny Malyar

# business vocabulary

In reality, competition is always imperfect, and is divided into types, depending on which condition corresponds to the market to a greater extent.

• Characteristics of perfect competition
• Signs of perfect competition
• Conditions close to perfect competition
• Advantages and disadvantages of perfect competition
• Advantages
• disadvantages
• perfect competition market
• Imperfect Competition
• Signs of imperfect competition
• Types of imperfect competition

Everyone is familiar with the concept of economic competition. This phenomenon is observed at the macroeconomic and even household level. Every day, choosing this or that product in the store, every citizen, willingly or not, participates in this process. And what is the competition, and, finally, what is it in general from a scientific point of view?

Characteristics of perfect competition

To begin with, a general definition of competition must be adopted. Regarding this objectively existing phenomenon, accompanying economic relations from the moment of their inception, various concepts have been put forward, from the most enthusiastic to completely pessimistic.

According to Adam Smith, expressed in his Inquiries into the Nature and Causes of the Wealth of Nations (1776), competition with its "invisible hand" transforms the selfish motives of the individual into socially useful energy. The theory of a self-regulating market assumes the denial of any state intervention in the natural course of economic processes.

John Stuart Mill, who was also a great liberal and a supporter of maximum individual economic freedom, was more cautious in his judgments, comparing competition with the sun. Probably, this eminent scientist also understood that on a too hot day a little shade is also a blessing.

Any scientific concept involves the use of idealized tools. Mathematicians refer to this as having no width "line" or dimensionless (infinitely small) "point". Economists have a concept of perfect competition.

Definition: Competition is the competitive interaction of market participants, each of which seeks to obtain the greatest profit.

As in any other science, in economic theory a certain ideal model of the market is adopted, which does not fully correspond to the realities, but allows one to study the ongoing processes.

Signs of perfect competition

The description of any hypothetical phenomenon requires criteria to which a real object should (or can) aspire. For example, doctors consider a healthy person with a body temperature of 36.6 ° and a pressure of 80 to 120. Economists, listing the features of perfect competition (also called pure competition), also rely on specific parameters.

The reasons why it is impossible to achieve the ideal are not important in this case - they are inherent in human nature itself. Each entrepreneur, receiving certain opportunities to assert their positions in the market, will definitely use them. However, hypothetical Perfect competition is characterized by the following features:

• An infinite number of equal participants, which are understood as sellers and buyers. The convention is obvious - nothing limitless exists within our planet.
• None of the sellers can influence the price of the product. In practice, there are always the most powerful participants capable of carrying out commodity interventions.
• The proposed commercial product has the properties of uniformity and divisibility. Also purely theoretical. An abstract commodity is something like grain, but even it can be of different quality.
• Complete freedom of participants to enter or leave the market. In practice, this is sometimes observed, but by no means always.
• Hassle-free movement production factors. Imagine, for example, a car factory that can be easily transferred to another continent, of course, you can, but this requires imagination.
• The price of a product is formed solely by the ratio of supply and demand, without the possibility of influence of other factors.
• And, finally, the complete public availability of information about prices, costs and other information, in real life, most often constituting a trade secret. There are no comments here at all.

After considering the above features, the conclusions are:

1. Perfect competition in nature does not exist and cannot even exist.
2. The ideal model is speculative and necessary for theoretical market research.

Conditions close to perfect competition

The practical utility of the concept of perfect competition lies in the ability to calculate the optimal equilibrium point of the firm, taking into account only three indicators: price, marginal cost and minimum total cost.

If these figures are equal to each other, the manager gets an idea of ​​​​the dependence of the profitability of his enterprise on the volume of production.

This intersection point is visually illustrated by a graph on which all three lines converge:

Where: S is the amount of profit; ATC is the minimum gross cost; A is the equilibrium point; MC is the marginal cost; MR is the market price of the product;

Q is the volume of production.

Advantages and disadvantages of perfect competition

Since perfect competition as an ideal phenomenon in the economy does not exist, its properties can only be judged by individual features that manifest themselves in some cases from real life (at the maximum possible approximation). Speculative reasoning will also help to determine its hypothetical advantages and disadvantages.

Advantages

Ideally, such competitive relations could contribute to the rational distribution of resources and the achievement of the greatest efficiency in production and commercial activities.

The seller is forced to reduce costs, since the competitive environment does not allow him to raise the price.

In this case, new economical technologies, high organization of labor processes and all-round thrift can serve as means of achieving advantages.

In part, all this is observed in real conditions of imperfect competition, but there are examples of a literally barbaric attitude towards resources on the part of monopolies, especially if state control is weak for some reason.

An illustration of the predatory attitude to resources can serve as the activities of the United Fruit company, long time ruthlessly exploiting the natural wealth of the countries of South America.

disadvantages

It should be understood that even in its ideal form, perfect (aka pure) competition would have systemic flaws.

• First, its theoretical model does not provide for economically unjustified spending on achieving public goods and raising social standards (these costs do not fit into the scheme).
• Secondly, the consumer would be extremely limited in the choice of a generalized product: all sellers offer in fact the same thing and at about the same price.
• Third, an infinitely large number of producers leads to a low concentration of capital. This makes it impossible to invest in large-scale resource-intensive projects and long-term scientific programs, without which progress is problematic.

Thus, the position of the firm under conditions of pure competition, as well as the position of the consumer, would be very far from ideal.

perfect competition market

The closest to the idealized model at the present stage is the exchange type of the market. Its participants do not have bulky and inert assets, they easily enter and leave the business, their product is relatively homogeneous (estimated by quotations).

There are many brokers (although their number is not infinite) and they operate mainly with supply and demand values. However, the economy does not consist of exchanges alone.

In reality, competition is imperfect, and is divided into types, whichever condition suits the market best.

Profit maximization in conditions of perfect competition is achieved exclusively by price methods.

The characteristics and model of the market are important for determining the possibilities of functioning in conditions of imperfect competition. It is hard to imagine that a huge number of sellers offer absolutely the same type of product, which is in demand among an unlimited number of buyers. This is the ideal picture, suitable only for conceptual reasoning.

In the real world, competition is always imperfect. At the same time, there is only one common feature of the markets of perfect and monopolistic competition (the most common) and it consists in the competitive nature of the phenomenon.

There is no doubt that business entities seek to achieve advantages, take advantage of them and develop success up to full mastery of all possible sales volumes.

In all other respects, perfect competition and monopoly differ significantly.

Signs of imperfect competition

Since the ideal model of "capitalist competition" has been discussed above, it remains to analyze its differences from what happens in a functioning world market. The main signs of real competition include the following points:

1. The number of manufacturers is limited.
2. Barriers, natural monopolies, fiscal and licensing restrictions objectively exist.
3. Market entry can be difficult. Exit too.
4. Products are produced in a variety of quality, price, consumer properties and other features. However, they are not always separable. Is it possible to build and sell half of a nuclear reactor?
5. Mobility of production takes place (in particular, towards cheap resources), but the processes of moving capacities themselves are very costly.
6. Individual participants have the opportunity to influence the market price of the product, including non-economic methods.
7. Technology and pricing information is not public.

From this list it is clear that the real conditions modern market are not only far from the ideal model, but most often contradict it.

Types of imperfect competition

Like any non-ideal phenomenon, imperfect competition is characterized by a variety of forms. Until recently, economists simplistically divided them according to the principle of functioning into three categories: monopoly, oligopolistic and monopolistic, but now two more concepts have been introduced - oligopsony and monopsony.

These models and types of imperfect competition deserve detailed consideration.

Monopsony

This type of imperfect competition occurs when only one consumer can purchase a manufactured product.

There are types of products intended, for example, exclusively for state structures (powerful weapons, special equipment). In economic terms, monopsony is the opposite of monopoly.

This is a kind of dictate of a single buyer (and not a manufacturer), and it is not common.

There is also a phenomenon in the labor market. When only one works in a city, for example, a factory, then ordinary person opportunities to sell their labor are limited.

Oligopsony

It is very similar to monopsony, but there is a choice of buyers, albeit small. Most often, such imperfect competition occurs between manufacturers of components or ingredients intended for large consumers.

For example, some recipe component can only be sold to a large confectionery factory, and there are only a few of them in the country.

Another option - a tire manufacturer seeks to interest one of the car factories for the regular supply of its products.

As a result, we note: any competition that exists in real conditions is as imperfect as the market itself. From the point of view of economic theory, perfect competition is a simplified concept. It is far from ideal, but necessary. Doesn't it surprise anyone that physicists use different mathematical models and scientific assumptions?

Imperfect competition is diverse in forms, and it is possible that new ones will be added to its already existing types in the future.

Perfect Competition

Competition is the basic concept of economics. It refers to the rivalry of subjects (companies, organizations, firms or individuals) in any segment of the economy in order to capture the market and make a profit.

Economists distinguish two types of competition:

Perfect
Imperfect (monopolistic, oligopoly and absolute monopoly).

The article discusses perfect competition in detail.

Definition of perfect competition

Perfect (pure) competition is a market model in which many sellers and buyers interact. At the same time, all subjects of market relations have equal rights and opportunities.

Imagine that there is a market for rye flour. It interacts with sellers (5 firms) and buyers. The rye flour market is designed in such a way that a new participant offering his products can easily enter it. In this market model, there is perfect (pure) competition.

A distinctive feature of the market of pure competition is that the seller and the buyer cannot influence the price of the goods. The price of a product is determined by the market.

Necessary Conditions for Perfect Competition

In order for the same product to have the same price from different sellers in the same period of time, the following conditions must be met:

1. Homogeneity of the market; 2. Unlimited number of sellers and buyers of the product;3.

No monopoly (one influential manufacturer that captured the lion's share of the market) and monopsony (the only buyer of the product); 4.

Prices for goods are set by the market, and not by the state or interested persons; 5. Equal opportunities for conducting economic and economic activities for all members of the society;

6. open information on the main economic indicators of all market players. It's about about the demand, supply and prices of the product. In a market of pure competition, all indicators are considered fairly;

7. Mobile factors of production;

8. The impossibility of a situation where one market entity influences the rest by non-economic methods.

If these conditions are met, perfect competition is established in the market. Another thing is that in practice this does not happen. Let's look at why next.

Pure competition - abstraction or reality?

There is no perfect competition in real life. Any market consists of living people who pursue their own interests and have leverage over the process. There are three main barriers that prevent a new firm from simply entering the market:

Economic. Trade marks, brands, patents and licenses. Organizations that have been on the market for a long time are sure to patent their product.

This is done so that newcomers cannot simply copy the product and start a successful trade; Bureaucratic. With any number of approximately equal producers, a dominant firm always stands out.

It is she who has the power in the market and sets the price of the product;

Mergers and acquisitions. Large enterprises buy up new, developing firms. This is done to introduce new technologies and expand the range of the enterprise under one brand. An effective way to compete with successful newcomers.

Economic and bureaucratic obstacles greatly increase the costs for newcomers to enter the market. Business leaders ask themselves questions:

1. Will the income from the sale of products cover the costs of promotion and development?
2. Will my business be profitable?

The purpose of barriers to entry is to prevent new businesses from gaining a foothold in the market. Theoretically, any enterprise can become a new monopolist. There have been such cases in history. Another thing is that in percentage terms it will be 1-2% of 100% of new enterprises.

Markets close to pure competition

If pure competition is an abstraction, why is it needed? An economic model is needed in order to study the laws of the market and more complex types of competition. Perfect competition plays a very important role in the economy:

1. Almost perfect competition emerges in some markets. This includes agriculture, securities and precious metals. Knowing the model of perfect competition, it is quite easy to predict the fate of a new firm.
2. Pure competition is a simple economic model. It allows comparison with other types of competition.

Perfect competition, like other types of rivalry between economic entities, is an integral part of market relations.

Perfect competition. Examples of perfect competition

Improving production, reducing production costs, automating all processes, optimizing the structure of enterprises - all this is an important condition for the development of 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.

Perfect competition can lead to decline

This is due to the fact that in the long run there is a constant decrease in prices. And if the human resource in the world is large, then the technological one is very limited. And sooner or later, enterprises will move to the fact that all fixed assets and all production processes will be modernized, and the price will still fall due to attempts by 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 goods should determine the cost of production, the level of demand, as well as supply;

– there should be no barriers to entry or entry into the market of perfect competition. Examples can be very different from the small business sector, where special requirements are not created and special licenses are not needed: ateliers, 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 price level, which is established by non-market means. An example of such a market is a whole sector of the economy - the oil and gas industry, and Gazprom is a monopoly company.

An example of a perfectly competitive market is the provision of automotive repair services. There are a lot of various service stations and car repair shops both in the city and in other settlements. 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, under a monopoly, a monopolist 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, production optimization 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 the 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 large 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.

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As already noted, the most important features of a market system are independence, independence, economic freedom of market entities, which implies, in particular, the freedom of the manufacturer in choosing the type, volume, and price of products. But if everyone has the right to freely produce and sell their product, then there are many producers (sellers) on the market, and competition objectively arises between them, competition - competition.

Competition(from lat. competitor - run together, collision) is the struggle of entrepreneurs for the most favorable conditions for the production and sale of goods in order to maximize profits. The Law of the Russian Federation “On Competition and Restriction of Monopolistic Activity in Commodity Markets” defines competition as follows: “competition is the competitiveness of economic entities, when their independent actions effectively limit the ability of each of them to unilaterally influence the general conditions for the circulation of goods in the relevant commodity market” (Art. 4. Appendix 5.1).

The importance of competition cannot be overestimated. It is in the course of competition in a market economy that the questions are resolved: what, how and for whom should be produced.

Competition is the way effective distribution limited resources society. If the offer more demand, then a struggle inevitably arises between sellers, they are forced to reduce the price, which, as a rule, leads to a reduction in the volume of production of this product and to a decrease in the resources invested in this production. If demand is greater than supply, then competition arises between buyers, each of them seeks to offer a higher price for a scarce product - the price rises, supply increases, i.e. more resources are involved in the production of this product.

To survive in the competition, the entrepreneur must produce exactly what the consumer prefers. This means that resources (factors of production) are directed to those industries where they are most needed.

Competition performs stimulating function. The desire to stay on the market, to maximize their profit, makes the entrepreneur improve his production, improve product quality, and reduce production costs. In a competitive struggle, each seller, thinking primarily about his own benefit, offers better or cheaper goods, thereby benefiting his customers and the economic well-being of society as a whole.

Through competition, income distribution in accordance with the contribution and efficiency of the use of factors of production. Efficient use of resources allows producers to receive high incomes; if resources are used inefficiently, they incur losses and can be forced out of the market.

There are different types of competitive behavior:

Creative (creative) - behavior aimed at creating preconditions that provide superiority over rivals;

Adaptive - taking into account innovative changes in production (copying) and proactive actions of rivals;

Providing (guaranteeing) - behavior aimed at maintaining the achieved positions.

From point of view competitive activity in a particular market there are: leaders; leadership contenders; slaves; newcomers.

It is obvious that the "followers" are less active in the competitive struggle, it reaches more sharpness between the "leaders" and "contenders for leadership", and the most active, attacking competitors are the "newbies".

In order to provide the best opportunities for marketing their products, sellers use different methods of competition:

price competition, when a manufacturer, in order to create more favorable conditions on the market for his products and undermine the position of a competitor, lowers the price by reducing production costs. If the seller occupies a dominant position in a particular market, then he can set a monopoly low price for products without changing production costs.

non-price competition: boost technical level, product quality, output new products, the creation of substitute goods, after-sales service, advertising. Non-price competition is the most widespread in the modern world.

All of these are methods. honest, fair competition struggle, they are "legal" in nature. Fair competition leads to consumer benefit(he gets more variety of products, better quality, at lower prices).

Competition may be dishonest, dishonest. Such competition is understood as ways to strengthen the market position of the company, associated not with improving the quality of products and reducing the costs of its production, but with the use of methods such as:

Selling at a price below cost;

Establishing discriminatory (different for different buyers) prices or commercial conditions;

Establishing the dependence of the supply of specific goods on the adoption of restrictions on the production of competing goods;

Unfair copying of competitors' products;

Violation of quality, standards and conditions for the supply of goods;

Industrial espionage;

Poaching of leading specialists from competing firms, etc.

Unfair competition is prohibited by the laws of most market economies, civil and criminal codes. The Law of the Russian Federation “On Competition and Restriction of Monopolistic Activities in Commodity Markets” defines unfair competition as “any kind aimed at acquiring advantages in entrepreneurial activity actions of economic entities that are contrary to the provisions of the current legislation, business practices, the requirements of integrity, reasonableness and fairness and may cause or have caused losses to other economic entities - competitors or damage their business reputation” (Article 4). The law does not allow unfair competition, including:

Distribution of false, inaccurate or distorted information that can cause losses to another business entity or damage its business reputation;

Misleading consumers about the nature, method and place of manufacture, consumer properties, quality of goods;

Incorrect comparison by an economic entity of the goods it produces or sells with the goods of other economic entities;

Sale of goods with illegal use of the results of intellectual activity...

Receipt, use, disclosure of scientific, technical, industrial or trade information, including trade secrets, without the consent of its owner (Article 4).

So, competition is a necessary tool of the market mechanism, a way to achieve market equilibrium. However, the nature of competition may be different. Depending on the ratio of competition and monopoly, two types of market are distinguished: perfect and imperfect competition.

27. Perfect, free or pure competition- an economic model, an idealized state of the market, when individual buyers and sellers cannot influence the price, but form it with their contribution of supply and demand. In other words, this is a type of market structure where the market behavior of sellers and buyers is to adapt to the equilibrium state of market conditions.

Features of perfect competition:

An infinite number of equal sellers and buyers

Homogeneity and divisibility of products sold

no barriers to entry or exit from the market

high mobility of factors of production

Equal and full access of all participants to information (prices of goods)

In the case when at least one feature is absent, competition is called imperfect. In the case when these signs are artificially removed in order to occupy a monopoly position in the market, the situation is called unfair competition.

In some countries, one of the widely used types of unfair competition is the giving of bribes, explicitly and implicitly, to various representatives of the state in exchange for various kinds of preferences.

David Ricardo revealed a natural tendency in conditions of perfect competition to reduce the economic profit of each of the sellers.

In the real economy stock market most similar to a perfectly competitive market. In the course of observing the phenomena of economic crises, it was concluded that this form of competition usually fails, which can be overcome only through external intervention.

Resource Allocation Efficiency- the optimal allocation of resources between firms and industries, which allows you to produce aggregate products that best meet the needs of consumers. The criterion for the efficiency of resource allocation is the equality of price (p) and marginal cost (MC). The discrepancy between the indicated values ​​means for individual firms less than the maximum possible profits, as well as underallocated resources (p > MC) or their excessive amount (p< МС).

Under pure competition, profit-driven entrepreneurs will produce the output at which price and marginal cost equalize. This means that resources in a competitive environment are distributed efficiently.

28.Monopolistic competition: equilibrium conditions for the producer in the short and long run. Efficiency of the market of monopolistic competition.

Monopolistic competition- type of market structure of imperfect competition. This is a common type of market, the closest to perfect competition.

Monopolistic competition is not only the most common, but also the most difficult to study form of industry structures. An exact abstract model cannot be built for such an industry, as can be done in cases of pure monopoly and pure competition. Much here depends on the specific details that characterize the manufacturer's product and development strategy, which are almost impossible to predict, as well as on the nature of the strategic choices available to firms in this category.

Thus, most of the world's enterprises can be called monopolistically competitive.

Variants of equilibrium of the firm in the short and long run

A perfectly competitive firm, as already noted, is quite rare in the economy. However, the analysis of the behavior of such a firm allows us to compare the "ideal" market with the real one. The behavior of a perfectly competitive firm is characterized as adaptive, since it adjusts costs and production volumes to an externally set market price. To analyze the behavior of a perfectly competitive firm in the short and long term, it is necessary to determine their differences.
In contrast to the long run, in the short run the volume of production capacity remains unchanged. In the short term, the manufacturer does not have time to change the size of production areas, the amount of equipment used. In the short run, the number of firms in the market does not change, so the market price remains unchanged. Economic profit cannot be at zero. In the long run, the manufacturer can change both the amount of equipment used and the size of production capacity. In addition, the number of firms in the market may change in the long run, as there are no economic or legal barriers to entry. As a result of the process of free entry and entry of new firms, zero economic profit is possible.
What will be the behavior of a competitive firm in the short run if the firm faces a choice - stop production or produce a certain amount of output? In the short run, a competitive firm may operate at a loss because it expects to make a profit in the future. What is the termination condition? In order to answer this question, it is necessary to analyze the ratio of price (P) and average variable costs (AVC). If the price turns out to be higher than the average variable costs, then, accordingly, the income brought by each unit of output will fully cover the variable costs and partially the fixed ones. However fixed costs should always be covered: both when the product is released and when its release is suspended. Therefore, it becomes necessary to continue production for their partial payment. If the price is below average variable costs, then both fixed and variable costs will not be paid in full. In this situation, it is more expedient to suspend production. However, this does not mean a complete closure of production. But if the firm is able to pay fixed costs, then it can stay in the market and continue production if prices rise. Of course, some firms, unable to withstand such a tough situation for a long time, will be forced to leave the industry. If we represent this situation graphically, then point A will be the exit point of the firm from the market (Fig. 9.6).

Rice. 9.6. The supply curve of a competitive firm in the short run.

In the long run, the economic profit of a perfectly competitive firm can be zero. Why? In the long run, the number of firms in a market may change as some firms enter the industry and others leave. As already noted, this is due to the absence of any barriers. However, the process of entering and exiting the market may stop. The reason for this may be the lack of economic profit (Fig. 9.7). There will be no economic profit if the price coincides with the minimum long-run average cost (LAC):

Rice. 9.7. Equilibrium of a competitive firm in the long run

29. Oligopoly: the essence of oligopoly; forms of interaction between firms in the oligopolistic market and the factors that determine them. Oligopoly based on cooperation (collusion) of firms; models of competitive pricing in an oligopolistic market.

Oligopoly- a type of market structure of imperfect competition, which is dominated by an extremely small number of firms. Examples of oligopolies include passenger aircraft manufacturers such as Boeing or Airbus, car manufacturers such as Mercedes, BMW, etc. Another definition of an oligopolistic market can be a value of the Herfindahl index greater than 2000. An oligopoly with two participants is called a duopoly

Oligopoly in the commodity market. Oligopolistic pricing models

The oligopolistic market is characterized by: a small number of firms (2-7); The proportion of each is quite large; standardized (steel, cement) or differentiated (cars, cigarettes) products; Entry to the market is difficult (by the same barriers that exist in a monopolistic market); the need to take into account the possible reaction of rivals when making decisions; · the absence of a single pricing model, while the main rule of profit maximization (MR=MC) is taken into account. In oligopolistic markets, firms exercise control over prices and volumes of production, have profit in both the short and long run. Let's name some pricing models. Price war model (conscious rivalry). A price war is a gradual price reduction by rival firms in an oligopolistic market. This situation arises if a competitor is tempted to increase their sales by cutting prices and thereby capturing the sales market. All firms in the industry are involved in this process. The price war continues until the price drops to the level of average cost; economic profit in this case is already equal to zero. Schedule. Price war model (equilibrium at P=AC) Price wars are good for buyers, oligopolistic firms end up losing their revenues (except perhaps the firm starting the war). Therefore, this situation does not occur often. The collusion model is more common. The firms reach an agreement (in the cartel firm) on prices and outputs. This makes it possible to limit competition, reduce uncertainty and increase profits. But there are obstacles to collusion (differences in costs, legal obstacles, the possibility of new competitors, the size of firms, etc.), so it is short-lived. Schedule. Collusion Model (MR=MC; P>AC) Another model for coordinating the price behavior of oligopolists is price leadership, in which one of the producers-sellers receives the status of a price leader recognized by others. He regulates the price of products, all other firms follow him. The price leader assumes the risk of being the first to start adjusting the price to changing market conditions, while adhering to the following tactics: sets the price taking into account the profit maximization rule MR=MC in order to prevent other firms from entering the industry and maintain its oligopolistic structure; Adjusts the price infrequently (only if there is a significant change in demand or costs); · About the impending revision of prices is reported in the trade publications. Usually, two main types of price leadership are distinguished - the leadership of a firm with significantly lower costs than competitors and the leadership of a firm that dominates the market, but does not significantly differ from its followers in terms of costs. Schedule. Price Leadership Model Cournot model. For the first time, the duopoly model (two competing firms) was proposed by the French mathematician and economist Augustin Cournot in 1838. The model assumes that firms produce homogeneous goods. Each firm must decide how much to produce, remembering that its competitor also decides on output, and that the price will ultimately depend on the combined output of both firms. The essence of the model is that when making a decision, the oligopolist is guided by the desire to maximize his profit, assuming that the output of another oligopolist is given. Eventually, the process ends with their outputs equalizing, and then the duopoly reaches a Cournot equilibrium, in which each firm maximizes its profits. Price rigidity is the basis of the broken demand curve model of the oligopoly firm. The model explains price rigidity, but not price setting itself. Firms seek price stability. Even if costs decrease or demand falls, oligopolists are in no hurry to reduce the price (to be afraid, believing that they may be misunderstood by competitors, and a price war will begin). If costs or demand grow, they do not seek to raise the price (think: competitors may not follow them). Any change in price will lead to undesirable consequences, so firms try to keep the price.

30 Patterns of formation of supply and demand for economic resources.

The patterns of demand formation can be expressed in two ways:

1.Tabular:

R, rub. 1 2 3 4 5

2.Graphic:

A demand curve is a curve showing how many economic goods buyers are willing to buy at different prices at a given time.

Factors affecting demand:

1. Price.

2. Non-price.

Non-price factors:

1. Changes in the cash income of the population.

2. Change in the structure of the population.

3.Change in prices for commodity substitutes.

4.Economic policy of the government.

5. Changing consumer preferences.

11. The concept of market supply, supply curves. Factors affecting the offer.

Supply is the willingness of manufacturers and sellers of goods to provide the market with a certain amount of goods at a given price. The law of supply is directly proportional between price and quantity.

Arguments in favor of the law of supply:

1. High price covers production costs and generates income.

2. The high price finances the expansion of production.

In the short run, the law of diminishing returns applies, since as the variable factor of production increases by the constant factor, the return on each additional unit of the increasing factor tends to fall. As a result of this law, an increase in production in the short run causes a rapid increase in costs.

Factors affecting the offer:

Non-price.

Non-price factors:

Resource prices.

New technologies.

Increasing taxes on producers - they cause an increase in costs and supply is reduced.