What is imperfect competition. Perfect competition Features of perfect competition

A perfectly competitive market is characterized by the following features:

Firms produce the same, so that consumers do not care which manufacturer to buy it from. All products in the industry are perfect substitutes, and the cross-price elasticity of demand for any pair of firms tends to infinity:

This means that any arbitrarily small increase in the price of one producer above the market level leads to a reduction in demand for his products to zero. Thus, the difference in prices may be the only reason for preferring one or another firm. No non-price competition.

The number of economic entities in the market is unlimited, and their specific gravity so small that the decisions of an individual firm (an individual consumer) to change the volume of its sales (purchases) do not affect the market price product. This, of course, assumes that there is no collusion between sellers or buyers to obtain monopoly power On the market. The market price is the result of the combined actions of all buyers and sellers.

Freedom to enter and exit the market. There are no restrictions and barriers - there are no patents or licenses restricting activity in this industry, significant initial investments are not required, the positive effect of scale of production is extremely small and does not prevent new firms from entering the industry, there is no government intervention in the mechanism of supply and demand (subsidies , tax incentives, quoting, social programs and so on.). Freedom of entry and exit absolute mobility of all resources, freedom of their movement territorially and from one type of activity to another.

Perfect Knowledge all market participants. All decisions are made in certainty. This means that all firms know their income and cost functions, the prices of all inputs, and all possible technologies, and all consumers have complete information about the prices of all firms. It is assumed that information is distributed instantly and free of charge.

These characteristics are so strict that there are practically no real markets that would fully satisfy them.

However, the perfect competition model:

  • allows you to explore markets in which a large number of small firms sell homogeneous products, i.e. markets similar in terms of conditions to this model;
  • clarifies the conditions for profit maximization;
  • is the standard for evaluating the performance of the real economy.

Short-run equilibrium of a firm under perfect competition

Demand for a perfect competitor's product

Under perfect competition, the prevailing market price is established by the interaction of market demand and market supply, as shown in Fig. 1 and defines the horizontal demand curve and average income (AR) for each individual firm.

Rice. 1. The demand curve for the products of a competitor

Due to product homogeneity and availability a large number perfect substitutes, no firm can sell its product at a price slightly higher than the equilibrium price, Pe. On the other hand, an individual firm is very small compared to the aggregate market, and it can sell all its output at the price Pe, i.e. she has no need to sell the commodity at a price below Re. Thus, all firms sell their products at the market price Pe, determined by market demand and supply.

Income of a firm that is a perfect competitor

The horizontal demand curve for the products of an individual firm and the single market price (Pe=const) predetermine the shape of the income curves under perfect competition.

1. Total income () - the total amount of income received by the company from the sale of all its products,

presented on the chart linear function, which has a positive slope and originates at the origin, since any sold unit of output increases the volume by an amount equal to the market price!!Re??.

2. Average income () - income from the sale of a unit of production,

is determined by the equilibrium market price!!Re??, and the curve coincides with the firm's demand curve. A-priory

3. Marginal income () - additional income from the sale of one additional unit of output,

Marginal revenue is also determined by the current market price for any amount of output.

A-priory

All income functions are shown in Fig. 2.

Rice. 2. Competitor's income

Determination of the optimal output volume

Under perfect competition, the current price is set by the market, and an individual firm cannot influence it, since it is price taker. Under these conditions, the only way to increase profits is to regulate the volume of output.

Based on the current market and technological conditions, the firm determines optimal output volume, i.e. the volume of output that provides the firm profit maximization(or minimization if profit is not possible).

There are two interrelated methods for determining the optimum point:

1. The method of total costs - total income.

The firm's total profit is maximized at the level of output where the difference between and is as large as possible.

n=TR-TC=max

Rice. 3. Determination of the point of optimal production

On fig. 3, the optimizing volume is at the point where the tangent to the TC curve has the same slope as the TR curve. The profit function is found by subtracting TC from TR for each output. The peak of the total profit curve (p) shows the output at which profit is maximum in short term.

From the analysis of the function of total profit, it follows that total profit reaches its maximum at the volume of production at which its derivative is equal to zero, or

dp/dQ=(p)`= 0.

The derivative of the total profit function has a strictly defined economic sense is the marginal profit.

marginal profit ( MP) shows the increase in total profit with a change in output per unit.

  • If Mn>0, then the total profit function grows, and additional production can increase the total profit.
  • If Mn<0, то функция совокупной прибыли уменьшается, и дополнительный выпуск сократит совокупную прибыль.
  • And, finally, if Мп=0, then the value of the total profit is maximum.

From the first profit maximization condition ( MP=0) the second method follows.

2. The method of marginal cost - marginal income.

  • Мп=(п)`=dп/dQ,
  • (n)`=dTR/dQ-dTC/dQ.

And since dTR/dQ=MR, A dTC/dQ=MC, then total profit reaches its maximum value at such a volume of output at which marginal cost is equal to marginal income:

If marginal cost is greater than marginal revenue (MC>MR), then the company can increase profits by reducing production. If marginal cost is less than marginal revenue (MC<МR), то прибыль может быть увеличена за счет расширения производства, и лишь при МС=МR прибыль достигает своего максимального значения, т.е. устанавливается равновесие.

This equality valid for any market structures, however, in conditions of perfect competition, it is somewhat modified.

Since the market price is identical to the average and marginal revenues of a firm that is a perfect competitor (PAR = MR), then the equality of marginal costs and marginal revenues is transformed into the equality of marginal costs and prices:

Example 1. Finding the optimal volume of output in conditions of perfect competition.

The firm operates under perfect competition. Current market price Р=20 c.u. The total cost function has the form TC=75+17Q+4Q2.

It is required to determine the optimal output volume.

Solution (1 way):

To find the optimal volume, we calculate MC and MR, and equate them to each other.

  • 1. MR=P*=20.
  • 2. MS=(TC)`=17+8Q.
  • 3.MC=MR.
  • 20=17+8Q.
  • 8Q=3.
  • Q=3/8.

Thus, the optimal volume is Q*=3/8.

Solution (2 way):

The optimal volume can also be found by equating the marginal profit to zero.

  • 1. Find the total income: TR=P*Q=20Q
  • 2. Find the function of total profit:
  • n=TR-TC,
  • n=20Q-(75+17Q+4Q2)=3Q-4Q2-75.
  • 3. We define the marginal profit function:
  • Mn=(n)`=3-8Q,
  • and then equate Mn to zero.
  • 3-8Q=0;
  • Q=3/8.

Solving this equation, we got the same result.

Short-term benefit condition

The total profit of the enterprise can be estimated in two ways:

  • P=TR-TC;
  • P=(P-ATS)Q.

If we divide the second equality by Q, then we get the expression

characterizing the average profit, or profit per unit of output.

It follows that a firm's profit (or loss) in the short run depends on the ratio of its average total cost (ATC) at the point of optimal production Q* to the current market price (at which the firm, a perfect competitor, is forced to trade).

The following options are possible:

if P*>ATC, then the firm has a positive economic profit in the short run;

Positive economic profit

In the figure, total profit corresponds to the area of ​​the shaded rectangle, and average profit (ie profit per unit of output) is determined by the vertical distance between P and ATC. It is important to note that at the optimum point Q*, when MC=MR, and the total profit reaches its maximum value, n=max, the average profit is not maximum, since it is determined not by the ratio of MC and MR, but by the ratio of P and ATC.

if R*<АТС, то фирма имеет в краткосрочном периоде отрицательную экономическую прибыль (убытки);

Negative economic profit (loss)

if P*=ATC, then economic profit is zero, production is breakeven, and the firm earns only normal profit.

Zero economic profit

Termination Condition

In conditions when the current market price does not bring positive economic profit in the short term, the firm faces a choice:

  • or continue unprofitable production,
  • or temporarily suspend its production, but incur losses in the amount of fixed costs ( FC) production.

The company makes a decision on this issue based on the ratio of its average variable cost (AVC) and market price.

When a firm decides to close, its total earnings ( TR) fall to zero, and the resulting losses become equal to its total fixed costs. Therefore, until price is greater than average variable cost

P>AVC,

firm production should continue. In this case, the income received will cover all the variables and at least part of the fixed costs, i.e. losses will be less than at closing.

If price equals average variable cost

then from the point of view of minimizing losses to the firm indifferent, continue or stop its production. However, most likely the company will continue its activities in order not to lose its customers and keep the jobs of employees. At the same time, its losses will not be higher than at closing.

And finally, if prices are less than average variable costs the firm should cease operations. In this case, she will be able to avoid unnecessary losses.

Production termination condition

Let us prove the validity of these arguments.

A-priory, n=TR-TS. If a firm maximizes its profit by producing the nth number of products, then this profit ( n) must be greater than or equal to the profit of the firm under the conditions of closing the enterprise ( By), because otherwise the entrepreneur will immediately close his enterprise.

In other words,

Thus, the firm will continue to operate only as long as the market price is greater than or equal to its average variable cost. Only under these conditions, the firm minimizes its losses in the short run, continuing to operate.

Intermediate conclusions for this section:

Equality MS=MR, as well as the equality MP=0 show the optimal output volume (i.e., the volume that maximizes profits and minimizes losses for the firm).

The ratio between the price ( R) and average total cost ( ATS) shows the amount of profit or loss per unit of output while continuing production.

The ratio between the price ( R) and average variable costs ( AVC) determines whether or not to continue activities in the event of unprofitable production.

Competitor's short run supply curve

A-priory, supply curve reflects the supply function and shows the amount of goods and services that producers are willing to supply to the market at given prices, at a given time and place.

To determine the short-run supply curve of a perfectly competitive firm,

Competitor's supply curve

Let's assume that the market price is Ro, and the average and marginal cost curves look like those in Fig. 4.8.

Because the Ro(closing points), then the firm's supply is zero. If the market price rises to a higher level, then the equilibrium output will be determined by the relation MC And MR. The very point of the supply curve ( Q;P) will lie on the marginal cost curve.

By consistently raising the market price and connecting the resulting points, we get a short-run supply curve. As can be seen from the presented Fig. 4.8, for a firm-perfect competitor, the short-run supply curve coincides with its marginal cost curve ( MS) above the minimum level of average variable costs ( AVC). At lower than min AVC level of market prices, the supply curve coincides with the price axis.

Example 2: Defining a sentence function

It is known that a firm-perfect competitor has total (TC), total variable (TVC) costs represented by the following equations:

  • TS=10+6 Q-2 Q 2 +(1/3) Q 3 , Where TFC=10;
  • TVC=6 Q-2 Q 2 +(1/3) Q 3 .

Determine the firm's supply function under perfect competition.

1. Find MS:

MS=(TC)`=(VC)`=6-4Q+Q 2 =2+(Q-2) 2 .

2. Equate MC to the market price (condition of market equilibrium under perfect competition MC=MR=P*) and get:

2+(Q-2) 2 = P or

Q=2(P-2) 1/2 , If R2.

However, we know from the preceding material that the supply quantity Q=0 for P

Q=S(P) at Pmin AVC.

3. Determine the volume at which the average variable costs minimal:

  • min AVC=(TVC)/ Q=6-2 Q+(1/3) Q 2 ;
  • (AVC)`= dAVC/ dQ=0;
  • -2+(2/3) Q=0;
  • Q=3,

those. average variable costs reach their minimum at a given volume.

4. Determine what min AVC equals by substituting Q=3 into the min AVC equation.

  • min AVC=6-2(3)+(1/3)(3) 2 =3.

5. Thus, the firm's supply function will be:

  • Q=2+(P-2) 1/2 ,If P3;
  • Q=0 if R<3.

Long-run market equilibrium under perfect competition

Long term

So far, we have considered the short-term period, which involves:

  • the existence of a constant number of firms in the industry;
  • enterprises have a certain amount of permanent resources.

IN long term:

  • all resources are variable, which means the possibility for a firm operating in the market to change the size of production, introduce new technology, modify products;
  • change in the number of enterprises in the industry (if the profit received by the firm is below normal and negative forecasts for the future prevail, the enterprise may close and leave the market, and vice versa, if the profit in the industry is high enough, an influx of new companies is possible).

Main assumptions of the analysis

To simplify the analysis, suppose that the industry consists of n typical enterprises with same cost structure, and that the change in the output of incumbent firms or the change in their number do not affect resource prices(we will remove this assumption later).

Let the market price P1 determined by the interaction of market demand ( D1) and market supply ( S1). The cost structure of a typical firm in the short run has the form of curves SATC1 And SMC1(Fig. 4.9).

Rice. 9. Long run equilibrium of a perfectly competitive industry

The mechanism of formation of long-term equilibrium

Under these conditions, the firm's optimal output in the short run is q1 units. The production of this volume provides the company positive economic profit, since the market price (P1) exceeds the firm's average short-term cost (SATC1).

Availability short-term positive profit leads to two interrelated processes:

  • on the one hand, the company already operating in the industry seeks to expand your production and receive economies of scale in the long run (according to the LATC curve);
  • on the other hand, external firms will begin to show interest in penetration into the industry(depending on the value of economic profit, the penetration process will proceed at different speeds).

The emergence of new firms in the industry and the expansion of the activities of old ones shifts the market supply curve to the right to the position S2(as shown in Fig. 9). The market price falls from P1 before P2, and the equilibrium volume of industry output will increase from Q1 before Q2. Under these conditions, the economic profit of a typical firm falls to zero ( P=SATC) and the process of attracting new companies to the industry is slowing down.

If for some reason (for example, the extreme attractiveness of initial profits and market prospects) a typical firm expands its production to the level q3, then the industry supply curve will shift even more to the right to the position S3, and the equilibrium price falls to the level P3, lower than min SATC. This will mean that firms will no longer be able to extract even normal profit and a gradual outflow of companies in more profitable areas of activity (as a rule, the least efficient ones leave).

The rest of the enterprises will try to reduce their costs by optimizing the size (i.e., by some reduction in the scale of production to q2) to a level at which SATC=LATC, and it is possible to obtain a normal profit.

Shifting the industry supply curve to the level Q2 cause the market price to rise to P2(equal to the minimum long-run average cost, P=min LAC). At a given price level, the typical firm earns no economic profit ( economic profit is zero, n=0), and is only able to extract normal profit. Consequently, the motivation for new firms to enter the industry disappears and a long-term equilibrium is established in the industry.

Consider what happens if the equilibrium in the industry is disturbed.

Let the market price ( R) has settled below the average long run cost of a typical firm, i.e. P. Under these conditions, the firm begins to incur losses. There is an outflow of firms from the industry, a shift in market supply to the left, and while maintaining market demand unchanged, the market price rises to the equilibrium level.

If the market price ( R) is set above the average long run costs of a typical firm, i.e. P>LATC, then the firm begins to earn a positive economic profit. New firms enter the industry, market supply shifts to the right, and with market demand unchanged, price falls to the equilibrium level.

Thus, the process of entry and exit of firms will continue until a long-term equilibrium is established. It should be noted that in practice, the regulatory forces of the market work better for expansion than for contraction. Economic profit and freedom to enter the market actively stimulate an increase in the volume of industry production. On the contrary, the process of squeezing firms out of an over-expanded and unprofitable industry takes time and is extremely painful for participating firms.

Basic conditions for long-run equilibrium

  • Operating firms make the best use of the resources at their disposal. This means that each firm in the industry maximizes its profit in the short run by producing the optimal output at which MR=SMC, or since the market price is identical to marginal revenue, P=SMC.
  • There are no incentives for other firms to enter the industry. The market forces of supply and demand are so strong that firms are unable to extract more than is necessary to keep them in the industry. those. economic profit is zero. This means that P=SATC.
  • In the long run, firms in an industry cannot reduce total average costs and profit by scaling up production. This means that in order to earn a normal profit, a typical firm must produce a volume of output corresponding to a minimum of average long-term total costs, i.e. P=SATC=LATC.

In a long-term equilibrium, consumers pay the lowest economically possible price, i.e. the price required to cover all production costs.

Market supply in the long run

The individual firm's long-run supply curve coincides with the rising leg of the LMC above min LATC. However, the market (industry) supply curve in the long run (as opposed to the short run) cannot be obtained by horizontally summing the supply curves of individual firms, since the number of these firms varies. The shape of the market supply curve in the long run is determined by how resource prices change in the industry.

At the beginning of the section, we introduced the assumption that changes in industry output do not affect resource prices. In practice, there are three types of industries:

  • With fixed costs;
  • with increasing costs
  • with decreasing costs.
Industries with fixed costs

The market price will rise to P2. The optimal output of an individual firm will be equal to Q2. Under these conditions, all firms will be able to earn economic profits by inducing other firms to enter the industry. The industry short-run supply curve shifts to the right from S1 to S2. The entry of new firms into the industry and the expansion of industry output will not affect resource prices. The reason for this may lie in the abundance of resources, so that new firms will not be able to influence the prices of resources and increase the costs of existing firms. As a result, the typical firm's LATC curve will remain the same.

Rebalancing is achieved according to the following scheme: the entry of new firms into the industry causes the price to fall to P1; profits are gradually reduced to the level of normal profit. Thus, industry output increases (or decreases) following a change in market demand, but the supply price in the long run remains unchanged.

This means that a fixed cost industry is a horizontal line.

Industries with rising costs

If an increase in industry volume causes an increase in resource prices, then we are dealing with the second type of industry. The long-term equilibrium of such an industry is shown in Fig. 4.9 b.

A higher price allows firms to earn economic profits, which attracts new firms to the industry. The expansion of aggregate production necessitates an ever wider use of resources. As a result of competition between firms, resource prices increase, and as a result, the costs of all firms (both existing and new ones) in the industry increase. Graphically, this means an upward shift in the marginal and average cost curves of the typical firm from SMC1 to SMC2, from SATC1 to SATC2. The short run firm's supply curve also shifts to the right. The adjustment process will continue until economic profits dry up. On fig. 4.9 the new equilibrium point will be the price P2 at the intersection of the demand curves D2 and supply S2. At this price, the typical firm chooses the output at which

P2=MR2=SATC2=SMC2=LATC2.

The long run supply curve is obtained by connecting short run equilibrium points and has a positive slope.

Industries with diminishing costs

Analysis of the long-term equilibrium of industries with decreasing costs is carried out according to a similar scheme. Curves D1,S1 - the initial curves of market demand and supply in the short term. P1 is the initial equilibrium price. As before, each firm reaches equilibrium at the point q1, where the demand curve - AR-MR touches min SATC and min LATC. In the long run, market demand increases, i.e. the demand curve shifts to the right from D1 to D2. The market price rises to a level that allows firms to earn economic profits. New companies begin to flow into the industry, and the market supply curve shifts to the right. The expansion of production leads to lower prices for resources.

This is a rather rare situation in practice. An example would be a young industry emerging in a relatively undeveloped area where the resource market is poorly organized, marketing is at a primitive level, and transport system functions poorly. An increase in the number of firms can increase the overall efficiency of production, stimulate the development of transport and marketing systems, and reduce the overall costs of firms.

External savings

Due to the fact that an individual firm cannot control such processes, this kind of cost reduction is called foreign economy(English external economies). It is caused solely by the growth of the industry and by forces beyond the control of the individual firm. External economies should be distinguished from the already known internal economies of scale, achieved by increasing the scale of the firm and completely under its control.

Taking into account the factor of external savings, the function total costs individual firm can be written as follows:

TCi=f(qi,Q),

Where qi- the volume of output of an individual firm;

Q is the output of the entire industry.

In industries with fixed costs, there are no external economies; the cost curves of individual firms do not depend on the output of the industry. In industries with increasing costs, there is negative external diseconomies, the cost curves of individual firms shift upwards with an increase in output. Finally, in industries with decreasing costs, there is a positive external economy that offsets internal uneconomics due to diminishing returns to scale, so that the cost curves of individual firms shift down as output increases.

Most economists agree that in the absence of technological progress, industries with increasing costs are most typical. Industries with diminishing costs are the least common. As industries with decreasing and fixed costs grow and mature, they are more likely to become industries with increasing costs. Against, technical progress can neutralize the rise in resource prices and even cause them to fall, resulting in a downward long-run supply curve. An example of an industry in which costs are reduced as a result of scientific and technical progress is the production of telephone services.

Imperfect competition is an economic phenomenon, a market model in which manufacturing firms have the opportunity to have a real impact on the price of goods. On the other hand, there is the concept of perfect competition. This economic model is a system characterized by an infinite number of buyers and sellers, homogeneous and divisible products, high mobility of production resources, equal and complete information access of all participants to the price of products, goods, and the absence of any obstacles to entry and exit to the market. Violation of at least one of these conditions theoretically means imperfect competition.

It is clear that the conditions pure competition practically impossible, while imperfect competition is a ubiquitous phenomenon.

Imperfect competition as an economic phenomenon

Based on the properties inherent in the conditional model of perfect competition, it is possible to determine what features are inherent in imperfect competition and how they manifest themselves in real market conditions.

This structure is characterized by various kinds of barriers that restrict entry into and exit from a particular market sector. There are limitations in product price information. The product itself is either unique, or its properties are differentiated compared to others, which leads to the ability of manufacturers and sellers to control prices for it: to overestimate, to keep it at a certain level. The goal is to maximize profit.

A striking example of imperfect competition are natural monopolies - firms whose activities are related to the supply of energy resources (electricity, gas) to the population. At low costs, such monopolists can set any price for their products in the future, while entry barriers to this market for newcomers are insurmountably high.

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

  1. Monopoly, small and medium business present on the market at the same time. They compete with each other, but monopolists, to one degree or another, have an advantage in regulating prices. This applies to both buyers and sellers of the product.
  2. Imperfect competition in the future is aimed at monopolizing the market (sales, raw materials, market work force etc.), in contrast to the perfect, which is characterized by the main goal - the sale of goods.
  3. The process of competition captures not only sales markets (retail, wholesale), but also production. Innovative developments in the manufacturing sector are turning into a method of dealing with competitors. The purpose of their implementation is to reduce production costs.
  4. Different methods of competition are used: from the use of price levers, as the most obvious, to non-price ones, aimed at improving the properties of the product, improving marketing and advertising policies. Non-economic methods are also used, which are usually referred to as unfair competition.

Forms of struggle for markets under imperfect competition have the following characteristics:

  • price- lowering prices for products, reducing costs in the production and marketing process, manipulating pricing, price maneuvers designed to attract a buyer;
  • non-price- emphasis on the quality of the product, attracting customers with the help of various promotions, offering a larger volume of goods or services for an equal price, non-standard advertising campaigns;
  • non-economic- industrial, economic espionage, bribery of responsible persons, etc.

Imperfect competition in all its diversity was considered in the works of E. Chamberlin, J. Hicks, J. Robinson, A. Cournot.

Forms of imperfect competition

Oligopoly characterized by a fairly limited number of sellers of goods or services (market of communications services). Oligopsony- a fairly limited number of buyers (labor market in small towns). At monopolies there is only one seller on the market (gas supply). At monopsony- the only buyer (sale of heavy weapons).

At monopolistic competition there are a large number of producers and sellers in the market sector selling similar but non-identical products (most often found in retail, household services).

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

  • the number of sellers (manufacturers);
  • market product differentiation;
  • the ability to influence prices;
  • entry and exit barriers.

For example, in the case of a monopoly quantitative indicator one, prices are fully controlled, products have unique qualities, and barriers to entry are very high, etc.

Labor market

Imperfect competition in the labor market is a complex phenomenon that includes several important factors. Note that this market sector is the most subject to regulation in order to minimize negative consequences"imperfect market".

Regulatory factors of the labor market:

  1. State. Legislatively regulates the level wages, preventing it from completely falling under the influence of market processes (income indexation, the establishment of a minimum wage, etc.).
  2. trade union organizations. Direct efforts to increase the level of remuneration of workers in the industry, the region, prepare and carry out the signing of agreements between trade unions and employers - market participants, in this direction.
  3. Large firms, corporations. They set the level of remuneration of specialists, which they hold for a long time. They are not interested in the frequent revision of the level of remuneration of employees.

Market laws in relation to the labor market work in a special way. The sale of labor force, skills and abilities is fixed, as a rule, by a long-term employment contract, which gives guarantees of employment to the employee, despite fluctuations in supply and demand. In addition, individual employment contract or the agreement cannot contain conditions worse than those fixed in the collective agreement or in labor legislation.

The seller in this case receives guarantees of employment, is withdrawn from market relations for the duration of the contract with the buyer.

The presence of restrictions on worse conditions in comparison with the collective agreement does not allow the employer to endlessly worsen the conditions of individual agreements, choosing the most “compliant” sellers. This factor is most significant if there is no trade union organization.

Imperfect competition and government regulation

Imperfect competition, being far from ideal models of building an economy, has its negative sides and consequences: an increase in product prices that is not justified by an increase in costs, an increase in production costs themselves, a slowdown in progressive trends, a negative impact on competitiveness on a scale of world markets, and finally, a slowdown in development economy.

At the state, governmental level, there are always administrative barriers for market participants, for example, exclusive rights that the state gives to a particular company.

On a note! Regulatory barriers can be expressed not only in state regulation as such, but also in the possession of the right to rare Natural resources, progressive scientific, technical developments, confirmed by a patent, a high level of start-up capital required to enter the market sector.

At the same time, the state, realizing the global danger of market monopolization, is fighting it. Antitrust regulation – a package of antitrust laws that is constantly evolving to reflect market trends. Based on it, administrative antimonopoly control of markets is carried out by authorized state antimonopoly structures. An effective mechanism for influencing monopolists is being developed.

Control is represented by a set of financial sanctions, the organizational mechanism does not affect the monopolists themselves, destroying them as a market phenomenon, but indirectly by supporting small and medium-sized businesses, reducing customs duties etc. Legislative regulation often directly prohibits certain economic steps that promote the formation of even larger monopolies, for example, the merger of large firms in a certain market sector.

Results

  1. Imperfect competition, as opposed to a perfect, ideal model, exists in real market structures. modern economy. The purpose of imperfect competition is to capture the market, its monopolization.
  2. Forms of imperfect competition differ in the number of sellers and buyers in a given market sector. You can conduct a comparative analysis of each form, paying attention to the level of barriers to entry into the market, the ability to influence prices, etc.
  3. The labor market in conditions of imperfect competition is subject to many regulatory factors from the state, trade unions, and large companies.
  4. Availability labor agreement leads to a temporary withdrawal of the seller from the labor market, allows him to guarantee stable employment, i.e. demand labor resources that he possesses.

2. State regulation .................................................................. .... 3

a.Causes state regulation............... 3

b.Tasks of state regulation.............................. 4

c.Types of state regulation of markets ....... 4

d.State regulation in Russia.............................. 5

3. A little bit.............................................. ............................... 6

4. Bibliography................................................. ................................. 7

Let's start from the beginning

studying different kinds markets, we divide them all, first, into two types: markets of perfect and imperfect competition, depending on the number of economic agents in the market, product differentiation, the share of an individual seller in the market, the presence or absence of entry and exit barriers in the market, the availability of information, the degree market power of sellers. But markets of perfect competition in life are quite rare (for example, the market for agricultural products or the market for valuable papers), but with imperfect competition (by which we mean monopolistic competition, oligopoly and monopoly), we meet much more often. And since sellers in such markets have market power, the prices of their goods are higher than in a perfectly competitive market. This means that state intervention and price regulation often serves the interests of buyers, except in cases where the state, for example, by supporting temporarily idle giant factories, artificially inflates prices for their products.

Since monopolistic competition is pretty close to perfect, we will turn our attention to the state regulation of oligopolies and monopolies. We will try to understand the causes and objectives of regulating their activities, consider the situation that has developed in Russia in the last decade.

Reasons for government regulation

Despite the presence technical efficiency concentration of production in the hands of one enterprise, a monopolist or oligopolist often abuses his position. This manifests itself in overstating costs or inflating profits. And unreasonably high prices negate the social effect of economies of scale.

There are two main options economic behavior a seller of goods in a non-competitive market, allowing to make a profit that is significantly greater than in the case of his actions in a competitive market.

1. The desire to extract economic profit and setting prices above marginal costs, in the case of establishing a single price for a product for different groups of consumers, leads to a reduction in production relative to the competitive level and the emergence of DWL ("dead weight losses"). In a competitive market, the price and production volumes are set at the level when the quantity demanded is equal to the quantity supplied, and we get the equilibrium price Pc at the production volume Qc. If the market is controlled by a monopoly, the latter will determine the volume of production based on the equality of the curves of marginal revenue and marginal cost (MR=MC). Then we get the level of production equal to Q* (Q* PC)

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 must 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 a form of redistribution of funds, so price discrimination is prohibited by most antitrust laws. 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 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 when 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;

Stimulation of 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

The state can regulate markets in two main ways. The first is the imposition of taxes on production. The second is the use of fixed prices (more often price ceilings). But both of these methods are not always efficient from an economic point of view, and sometimes generally lead to the opposite of the desired result. Let's take a closer look at both of these options.

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.

Initially, equilibrium was at the point where price was P* and quantity was Q*. After imposing a tax of T for each unit of a good, the supply curve shifted up by T units.

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).

Then the supply line takes position S'. The difference P”-P’ is compensation for the risk of exposure. The vertical difference S'-S determines the severity of sanctions for violation of price discipline. As a result, all goods go to the black market, and its price turns out to be even higher than the equilibrium price (before state intervention). As we can see, these two methods of regulating markets of imperfect competition are not ideal, but nevertheless, some results can be achieved with their help.
  • 7.1. Features of a perfectly competitive market.
  • 7.2. The performance of a competitive firm in the short run.
  • 7.3. Perfect competition market in the long run.

Control questions.

In topic 7, pay attention to the connection with the theory of the following topical issues Russian economy:

  • Why is there no free pricing in crime-controlled markets?
  • Where can you find perfect competition in Russia?
  • Bankruptcy of enterprises in Russia.
  • What are Russian enterprises doing to reach the break-even zone?
  • Why temporarily stop production for Russian factories?
  • Does widespread small business lead to price changes?
  • Why even in highly competitive markets government intervention may be needed.

Features of a perfectly competitive market

Supply and demand - two factors that give life to the market as a place of their meeting, form the level of prices for goods and services in the economy. By defining cost and income curves, they create external environment the existence of the firm. The behavior of the firm itself, its choice of production volumes, and hence the size of the demand for resources and the size of the supply of its own goods, depend on the type of market in which it operates.

competition

The most powerful factor dictating General terms the functioning of a particular market is the degree of development of competitive relations on it.

Etymologically word competition goes back to latin concurrentia, meaning clash, competition. Market competition is the struggle for the limited demand of the consumer, conducted between firms in the parts (segments) of the market accessible to them. As already noted (see 2.2.2), competition in a market economy performs the most important function of a counterbalance and, at the same time, an addition to the individualism of market entities. It forces them to take into account the interests of the consumer, and hence the interests of society as a whole.

Indeed, in the course of competition, the market selects from a variety of goods only those that consumers need. They are the ones that sell. Others remain unclaimed, and their production stops. In other words, outside competitive environment the individual satisfies his own interests, regardless of others. In the conditions of competition, the only way to realize one's own interest is to take into account the interests of other persons. Competition is a specific mechanism by which market economy solves fundamental questions What? How? for whom to produce 2

The development of competitive relations is closely related to splitting economic power. When it is absent, the consumer is deprived of a choice and is forced either to fully agree to the conditions dictated by the producer, or to be completely left without the good he needs. On the contrary, when economic power is split and the consumer deals with many suppliers of similar goods, he can choose the one that best suits his needs and financial possibilities.

Competition and types of markets

According to the degree of development of competition, economic theory distinguishes the following main types of market:

  • 1. Market of perfect competition,
  • 2. Market of imperfect competition, in turn subdivided into:
    • a) monopolistic competition
    • b) oligopoly;
    • c) a monopoly.

In a market of perfect competition, the splitting of economic power is maximal and the mechanisms of competition operate in full force. Many manufacturers operate here, deprived of any leverage to impose their will on consumers.

Under imperfect competition, the splitting of economic power is weaker or non-existent. Therefore, the manufacturer acquires a certain degree of influence on the market.

The degree of market imperfection depends on the type of imperfect competition. In conditions of monopolistic competition, it is small and is associated only with the ability of the manufacturer to produce special varieties of goods that differ from competitive ones. Under an oligopoly, market imperfection is significant and is dictated by the small number of firms operating on it. Finally, monopoly means that only one manufacturer dominates the market.

7.1.1. Conditions for perfect competition

The perfect competition market model is based on four basic conditions (Figure 7.1).

Let's consider them sequentially.

Rice. 7.1.

In order for competition to be perfect, the goods offered by firms must meet the condition of product homogeneity. This means that the products of firms in the view of buyers are homogeneous and indistinguishable, i.e. products of different enterprises are completely interchangeable (they are complete substitute goods).

Uniformity

products

Under these conditions, no buyer would be willing to pay a hypothetical firm more than he would pay its competitors. After all, the goods are the same, customers do not care which company they buy from, and they, of course, opt for the cheapest. That is, the condition of product homogeneity actually means that the difference in prices is the only reason why the buyer can prefer one seller to another.

Small size and large number of market participants

Under perfect competition, neither sellers nor buyers influence the market situation due to the smallness and multiplicity of all market participants. Sometimes both of these sides of perfect competition are combined, speaking of the atomistic structure of the market. This means that there are a large number of small sellers and buyers operating in the market, just as any drop of water is made up of a gigantic number of tiny atoms.

At the same time, purchases made by the consumer (or sales by the seller) are so small compared to the total volume of the market that the decision to lower or increase their volumes creates neither surpluses nor deficits. The aggregate size of supply and demand simply "does not notice" such small changes. So, if one of the countless beer stalls in Moscow closes, the capital's beer market will not become one iota more scarce, just as there will not be a surplus of the drink beloved by the people if one more “point” appears in addition to the existing ones.

The inability to dictate the price to the market

These limitations (homogeneity of products, large number and small size of enterprises) actually predetermine that under perfect competition, market participants are not able to influence prices.

It is ridiculous to believe, say, that one seller of potatoes on the "collective-farm" market will be able to impose on buyers a higher price for his product, if other conditions of perfect competition are observed. Namely, if there are many sellers and their potatoes are exactly the same. Therefore, it is often said that under perfect competition, each individual firm-seller "takes the price", or is a price-taker.

Market entities under conditions of perfect competition can influence the general situation only when they act in agreement. That is, when some external conditions encourage all sellers (or all buyers) of the industry to make the same decisions. In 1998, the Russians experienced this for themselves, when in the first days after the devaluation of the ruble, everyone Groceries Without agreeing, but equally understanding the situation, they unanimously began to inflate prices for goods of a “crisis” assortment - sugar, salt, flour, etc. Although the increase in prices was not economically justified (these goods rose in price much more than the ruble depreciated), the sellers managed to impose their will on the market precisely as a result of the unity of their position.

And this is not a special case. The difference in the consequences of a change in supply (or demand) by one firm and the entire industry as a whole plays a large role in the functioning of the perfectly competitive market.

No Barriers

The next condition of the perfect militia conbotniks (the goal is to force the criminal "owners" of the market to show themselves, and then arrest them), then it fights precisely for the removal of barriers to entering the market.

On the contrary, typical for perfect competition no barriers or freedom to enter to the market (industry) and leave it means that resources are completely mobile and move from one activity to another without problems. Buyers freely change their preferences when choosing goods, and sellers easily switch production to more profitable products.

There are no difficulties with the termination of operations in the market. Conditions do not force anyone to stay in the industry if it does not suit their interests. In other words, the absence of barriers means the absolute flexibility and adaptability of a perfectly competitive market.

Perfect

information

The last condition for the existence of a market of perfect competition is

giving a standardized homogeneous product, and, therefore, operating under conditions close to perfect competition.

2. It is of great methodological importance, since it allows - albeit at the cost of large simplifications of the real market picture - to understand the logic of the company's actions. This technique, by the way, is typical for many sciences. So, in physics, a number of concepts are used ( ideal gas, black body, ideal engine) built on the assumptions (no friction, heat loss, etc.), which are never completely fulfilled in the real world, but serve as convenient models for describing it.

The methodological value of the concept of perfect competition will be fully revealed later (see topics 8, 9 and 10), when considering the markets of monopolistic competition, oligopoly and monopoly, which are widespread in the real economy. Now it is expedient to dwell on the practical significance of the theory of perfect competition.

What conditions can be considered close to a perfectly competitive market? Generally speaking, there are different answers to this question. We will approach it from the position of the firm, that is, we will find out in what cases the firm in practice acts as (or almost so) as if it were surrounded by a market of perfect competition.

Criterion

perfect

competition

First, let's figure out what the demand curve for the products of a firm operating in conditions of perfect competition should look like. Recall, first, that the firm accepts the market price, i.e., the latter is a given value for it. Secondly, the firm enters the market with a very small part of the total amount of goods produced and sold by the industry. Consequently, the volume of its production will not affect the market situation in any way, and this given price level will not change with an increase or decrease in output.

Obviously, under such conditions, the demand curve for the firm's products will look like a horizontal line (Fig. 7.2). Whether the firm produces 10 units, 20 or 1, the market will absorb them at the same price P.

From an economic point of view, the price line, parallel to the x-axis, means the absolute elasticity of demand. In the case of an infinitesimal price reduction, the firm could expand its sales indefinitely. With an infinitesimal increase in the price, the sale of the enterprise would be reduced to zero.

The presence of perfectly elastic demand for the firm's product is called the criterion of perfect competition. As soon as such a situation develops in the market, the firm begins to

Rice. 7.2. Demand and total income curves for an individual firm under perfect competition

behave like (or almost like) a perfect competitor. Indeed, the fulfillment of the criterion of perfect competition sets many conditions for the company to operate in the market, in particular, determines the patterns of income.

Average, marginal and total revenue of the firm

Income (revenue) of the firm is called payments received in its favor when selling products. Like many other indicators, economic science calculates income in three varieties. total income(TR) name the total amount of revenue that the company receives. Average income(AR) reflects revenue per unit products sold , or (which is the same) total revenue divided by the number of products sold. Finally, marginal revenue(MR) represents the additional income generated from the sale of the last unit sold.

A direct consequence of fulfilling the criterion of perfect competition is that average income for any volume of output is equal to the same value - the price of the goods and that marginal revenue is always at the same level. So, if the price of a loaf of bread established in the market is 3 rubles, then the bread stall acting as a perfect competitor accepts it regardless of the volume of sales (the criterion of perfect competition is satisfied). Both 100 and 1000 loaves will be sold at the same price per piece. Under these conditions, each additional loaf sold will bring the stall 3 rubles. (marginal income). And the same amount of revenue will be on average for each loaf sold (average income). Thus, equality is established between average income, marginal income and price (AR=MR=P). Therefore, the demand curve for the products of an individual enterprise in conditions of perfect competition is simultaneously the curve of its average and marginal revenue.

As for the total income (total revenue) of the enterprise, it changes in proportion to the change in output and in the same direction (see Figure 7.2). That is, there is a direct, linear relationship:

If the stall in our example sold 100 loaves of 3 rubles, then its revenue, of course, will be 300 rubles.

Graphically, the curve of total (gross) income is a ray drawn through the origin with a slope:

That is, the slope of the gross income curve is equal to marginal revenue, which in turn is equal to the market price of the product sold by the competitive firm. From this, in particular, it follows that the higher the price, the steeper the straight line of gross income will go up.

Small business in Russia and perfect competition

The simplest example we have already cited, constantly occurring in everyday life, with the trade in bread, suggests that the theory of perfect competition is not as far from Russian reality as one might think.

The fact is that most of the new businessmen started their business literally from scratch: no one had large capitals in the USSR. Therefore, small business has embraced even those areas that in other countries are controlled by big capital. Nowhere in the world do small firms play a significant role in export-import transactions. In our country, many categories of consumer goods are imported mainly by millions of shuttles, i.e. not even just small, but the smallest enterprises. In the same way, only in Russia, “wild” brigades are actively engaged in construction for private individuals and renovation of apartments - the smallest firms, often operating without any registration. A specifically Russian phenomenon is also “small wholesale”- this term is even difficult to translate into many languages. In German, for example, wholesale is called "large trade" - Grosshandel, since it is usually carried out on a large scale. Therefore, the Russian phrase “small wholesale trade” is often conveyed by German newspapers with the absurd-sounding term “small-scale trade”.

Shuttle shops selling Chinese sneakers; and atelier, photography, hairdressing; vendors offering the same brands of cigarettes and vodka at metro stations and auto repair shops; typists and translators; apartment renovation specialists and peasants trading in collective farm markets - all of them are united by the approximate similarity of the product offered, the insignificant scale of the business compared to the size of the market, the large number of sellers, that is, many of the conditions for perfect competition. Mandatory for them and the need to accept the prevailing market price. The criterion of perfect competition in the sphere of small business in Russia is fulfilled quite often. In general, albeit with some exaggeration, Russia can be called a country-reserve of perfect competition. In any case, conditions close to it exist in many sectors of the economy where the new private business(rather than privatized enterprises).

There is a powerful factor that dictates the general conditions for the functioning of a particular market - the degree of development of competitive relations on it. The mechanisms of competition reach their maximum degree of development in a perfectly competitive market. The terms "perfect competition", "perfect market" were introduced into scientific circulation in the second half of the 19th century. Among the authors who first used the concept of "perfect market" is W. Jevons. Representatives of classical political economy, when characterizing market regulation, relied on the concept of free (unrestricted) competition, incompatible with any restrictions or monopoly tendencies.

Perfect competition: concept and main features

The nature of the interaction of firms with each other in the market is determined by the type of market (market structure). Market structure is a particular type of building industry market with its inherent manifestations of such key characteristics that determine the behavior of market participants and equilibrium parameters, such as the number of market agents (sellers and buyers), their awareness and mobility, the type of products produced, the conditions for entering the market and leaving it. Depending on the specific manifestations of these characteristics, it is customary to distinguish four main types of market structures :

  • 1) pure (perfect) competition;
  • 2) monopolistic competition;
  • 3) oligopoly;
  • 4) pure (absolute) monopoly.

They are presented in order of decreasing competition. The last three types of market are referred to by the general term "imperfect competition" and will be discussed in the next chapter.

The simplest and most basic type, or model, of the market is the market of perfect competition. Perfect Competition represents an ideal image of competition, in which there are many sellers and buyers with equal opportunities and rights in the market. At the same time, the influence of each participant in the economic process on the overall situation is so small that it can be neglected.

Perfect competition has the following main features.

  • 1. Numerous market entities. There are a large number of small sellers and buyers in the market. Because of this, sales (or purchases) made by the seller are negligible compared to the total market volume (less than 1% sales or purchases for any period).
  • 2. product homogeneity. This means that the products of competing firms are homogeneous and indistinguishable, i.e. these products of different enterprises are considered by the buyer as exact analogues. Since the goods are the same, the consumer does not care which seller to buy them from. Due to the homogeneity of products, there is no basis for non-price competition, i.e. competition based on differences in product quality, advertising or sales promotion.
  • 3. Lack of price control. Numerous producers and consumers homogeneous products actually predetermines that under perfect competition, market entities are not able to influence prices. When a seller sets a higher price for a product, buyers freely move to its many competitors. If, on the other hand, an individual seller fixes a price below the usual level, then the goods sold at such a price will not be able to satisfy the demand of buyers in a significant way and disrupt free competition among them. In a perfectly competitive market, both buyers and sellers are price takers they "agree" with the price, take it for granted.
  • 4. No barriers to entering and exiting the market. New firms are free to enter and existing firms to leave purely competitive markets (industries). There are no serious obstacles - legislative, financial or otherwise - that could prevent the emergence of new firms and the sale of their products in competitive markets. The absence of barriers means that resources are completely mobile and move seamlessly from one activity to another.
  • 5. Full awareness of market participants about its current state. Comprehensive information about prices, technology, demand and supply of goods, the rate of return is available to everyone. There are no trade secrets, unpredictable developments, unexpected actions of competitors. Decisions are made by buyers and sellers in conditions of complete certainty regarding the market situation.

These conditions can hardly be met by at least one of the really functioning markets. Even the markets most similar to perfect competition (the market of grain, securities, foreign currencies) only partially satisfy them. IN real life there are always some bureaucratic or economic restrictions on entering the industry and starting a business. There are many trademarks, differentiating goods. Even when there are many sellers in an industry, there is often a dominant firm that has bargaining power and sets prices.

Thus, the listed conditions are largely assumptions that are never completely fulfilled in the real world.

Therefore, one can speak of a market of perfect competition only as a scientific abstraction that makes it possible to more clearly reveal the unrestricted operation of the laws of the market. Nevertheless, for all its abstractness, the concept of perfect competition plays an important role in economic science.

First, there are industries that operate under conditions close to perfect competition. For example, Agriculture more appropriate for this type of market than any other market structure. Therefore, the model of a perfectly competitive market allows us to judge the principles of functioning of very many small firms selling homogeneous products.

Secondly, being the simplest market situation, perfect competition provides an initial sample, or standard, for comparison with other types of markets and for evaluating the effectiveness of real economic processes.

Let us find out how the firm operates in practice, provided that it is surrounded by a market of perfect competition, and the behavior of the firm will be different in the short and long run.