What is Imperfect Competition?
Imperfect competition is an economic model used to describe real-world markets that don’t perfectly fit the traditional models of perfect competition or monopoly. It is a type of market structure wherein there are multiple sellers who are selling differentiated products and whose individual actions do not directly affect the market prices.
Characteristics of Imperfect Competition
Imperfect competition has the following characteristics:
- Multiple Sellers – There are multiple sellers of differentiated products. Each seller faces the demand curve of the entire market.
- Differentiated Products – The products of the sellers are differentiated either by quality, features, prices, or some other unique features.
- Barriers to Entry – The barriers to entry for new firms to enter the market and compete with existing firms is high.
- Price Setting – Each seller sets its own price for its products and can adjust it independently from other sellers.
Examples of Imperfect Competition
Imperfect competition can be seen in many markets, such as the following:
- Retail Markets – Retail markets, such as clothing stores, are an example of imperfect competition. Each store has its own unique products, prices, and features, and customers have the choice to shop around for the best deal.
- Restaurant Markets – Restaurant markets are another example of imperfect competition. Restaurants have their own unique menus, prices, and services, and customers can choose the restaurant that best meets their needs.
- Pharmaceuticals – Pharmaceuticals markets also exhibit imperfect competition. Pharmaceutical companies have their own unique products, prices, and services, and customers can choose the company that offers the best deal.
Conclusion
Imperfect competition is an economic model used to describe real-world markets that don’t perfectly fit the traditional models of perfect competition or monopoly. It is characterized by multiple sellers of differentiated products, high barriers to entry, and each seller setting its own price for its products. It can be seen in many markets, such as retail markets, restaurant markets, and pharmaceuticals. For more information, please visit the following links: