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

1. the number of sellers and buyers;

2. the nature of the products;

3. conditions for entry/exit to the market;

4. information and mobility.

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

Perfect competition.

Consider the characteristic features of perfect competition.

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

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

3. In a perfectly competitive market, individual firms exercise little control over the price of output. This property follows from the previous two. Under perfect competition, each firm produces such a small fraction of its total output that an increase or decrease in its output will have no appreciable effect on the total supply, and hence the price of the product. A separate competing manufacturer agrees on a price; a competitive firm cannot set the market price, but can only adjust to it.

In other words, the individual competing producer is at the mercy of the market; the price of a product is a given quantity, which the producer has no influence on. A firm can get the same unit price for either more or less output. Asking for a higher price than the current market price would be useless. Customers won't buy anything from Firm A for $2.05 if its 9,999 competitors sell an identical product, or an exact substitute, for $2.05 each. Conversely, because firm A can sell as much as it thinks it needs, at $2 a piece, there is no reason for it to charge any more low price, for example $1.95. Because it would cause a decrease in its profits.

4. New firms are free to enter and existing firms are free to leave completely. competitive industries. In particular, there are no major obstacles - legislative, technological, financial or otherwise - that could prevent the emergence of new firms and the marketing of their products in competitive markets.

Imperfect Competition.

Imperfect competition has always existed, but it has become especially acute in late XIX- early XX century. due to the formation of monopolies. During this period, there is a concentration of capital, there are joint-stock companies, control over natural, material and financial resources is being strengthened. The monopolization of the economy was a natural consequence of a large jump in concentration industrial production under the influence of scientific technical progress. Professor P. Samuelson emphasizes this circumstance: “The economy of large-scale production may have certain factors that lead to the monopolistic content of business organization. This is especially evident in the rapidly changing field of technological development. It is clear that competition could not exist for a long time and be effective in the sphere of countless producers” Samuelson P. A. Economics. T.1.M.: 1993, p.54.

Most cases of imperfect competition can be explained by two main causes. First, there is a tendency to reduce the number of sellers in those industries that are characterized by significant economies of scale and cost reduction. Under these conditions, large firms are cheaper to manufacture and can sell their products at a lower price than small firms, which leads to the "crowding out" of the latter from the industry.

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

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

Consider the characteristic features monopolies .

1. Monopoly is an industry consisting of one firm. One firm is the only producer this product or sole supplier services; therefore, firm and industry are synonymous.

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

3. We emphasized that an individual firm operating in conditions of perfect competition does not influence the price of the product: it "agrees with the price." This is so because it provides only a small fraction of the total supply. In stark contrast is the pure monopoly that dictates the price: the firm exercises considerable control over the price. And the reason is obvious: it produces and therefore controls the total supply. With a downward-sloping demand curve for its product, the monopolist can cause a change in the price of the product by manipulating the quantity of the product supplied.

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

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

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

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

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

In its purest form, perfect price discrimination is difficult to achieve. Approximation to it is possible in the conditions of individual production, when each unit of production is produced by order of a particular consumer, and prices are set under contracts with customers.

2. Second degree price discrimination- sale of different volumes of goods (services) at different prices, so that the price of a unit of goods (services) is differentiated depending on the size of the lot. Second-degree price discrimination also includes the use of cumulative discounts depending on the time the goods (services) are sold.

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

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

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

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

3. The original buyer cannot resell the product or service. If those who buy in the low price area of ​​the market can easily resell in the high price area of ​​the market, the resulting reduction in supply would increase the price in the high price area of ​​the market. The policy of price discrimination would thus be undermined. This correctly means that service industries, such as transportation or legal and medical services, are particularly susceptible to price discrimination. See McConnell Campbell R., Brew Stanley L. Economics: Principles, Issues and Policies. In 2 volumes: Per. from English. 16th ed. - M.: Respublika, 1993. .

Thus, it is possible to identify the main pros and cons of a monopoly. The main plus is that the scale of production allows you to reduce costs and, in general, save resources; the products of monopolistic companies differ high quality which allowed them to gain a dominant position in the market. Monopolization acts to increase the efficiency of production: only a large firm in a protected market has sufficient funds to successfully conduct research and development. The main disadvantage is that monopolists tend to overprice and underestimate output; they make excessive profits, they are too reluctant to take risks.

Monopolistic competition refers to a market situation in which a relatively large number of small producers offer similar but not identical products. The differences between monopolistic and pure competition are very significant. For monopolistic competition it does not require the presence of hundreds or thousands of firms, a relatively small number of them, say 25, 25, 60 or 70, is sufficient.

Several important features of monopolistic competition follow from the presence of such a number of firms. First, each firm has a relatively small share of the total market, so it has very limited control over the market price. In addition, the presence of a relatively large number of firms also ensures that collusion, concerted action by firms to limit output and artificially raise prices, is almost impossible. Finally, given the large number of firms in the industry, there is no sense of interdependence between them; each firm determines its policy, not taking into account the possible reaction on the part of firms competing with it. The reaction of competitors can be ignored because the impact of one firm's actions on each of its many rivals is so small that those competitors would have no reason to react to the firm's actions.

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

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

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

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

4. Sales promotion and packaging. Product differentiation may also result - to a large extent - from perceived differences created through advertising, packaging and branding and trademarks. When a particular brand of jeans or perfume is associated with the name of a celebrity, it can affect the demand for these products from buyers. Many consumers find that toothpaste packaged in an aerosol can is more preferable than the same toothpaste in a regular tube. Although there are a number of medicines that are similar in properties to aspirin, creating favorable conditions for the sale and bright advertising can convince many consumers that bayer and anacin are the best and deserve a higher price than their more well-known substitute.

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

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

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

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

1. A firm's competitors can quickly and easily respond to price cuts. As a result, the possibility of a significant increase in anyone's market share is small; competitors quickly cancel out any possible increase in sales by responding to price cuts. And of course, there is always the risk that price competition will plunge participants into a disastrous price war. It is less likely that non-price competition will get out of control. Oligopolists believe that longer-term competitive advantages can be gained through non-price competition because product changes, manufacturing technology improvements, and good publicity stunts cannot be duplicated as quickly and as completely as price cuts.

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

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

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

Thus, we have considered competition corresponding to different market structures. According to the degree of decreasing competitiveness, they can be listed in the following order: perfect competition, monopolistic competition, oligopoly and monopoly. We have found that the use of non-price competition methods is more characteristic of firms operating in an oligopoly or monopolistic competition. While in conditions of perfect competition and monopoly, this need is no longer necessary. In the next chapter, we will take a closer look at the issue of price and non-price competition.

Imperfect competition - competition in conditions where individual producers have the ability to control the prices of the products they produce.

In contrast to the market model of perfect competition, which is an abstraction and practically does not exist in real life, but only in theory, the market of imperfect competition is found almost everywhere. Most real markets in modern economy These are markets of imperfect competition.

Signs of imperfect competition:

• the presence of barriers to entry into the industry;
• product differentiation;
• The main share of sales falls on one or several leading manufacturers;
• The ability to control all or part of the price of their products.

Under conditions of imperfect competition, the equilibrium of the firm (i.e., when MC = MR) will come when the average cost does not reach its minimum level, and the price is higher than the average cost:

(MC=MR)< AC < P

There are many examples of imperfectly competitive markets. These include the market of carbonated drinks led by the leading companies Coca-Cola and Pepsi, the car market (Toyota, Honda, BMW, etc.), the market household appliances and electronics (Samsung, Siemens, Sony), etc.

There are such types of imperfect competition as monopoly, oligopoly and monopolistic competition.

Table 1. Types of market structures of imperfect competition

Common Features of Imperfect Competition

The vast majority of real markets are markets of imperfect competition. They got their name due to the fact that competition, and hence the spontaneous mechanisms of self-regulation (the "invisible hand" of the market) act on them imperfectly. In particular, the principle of the absence of surpluses and deficits in the economy, which is precisely what

It testifies to the efficiency, perfection of the market system. As soon as some goods are redundant, and some are not enough, it is no longer possible to assert that all the available resources of the economy are spent only on the production of the necessary goods in the required quantities.

The prerequisites for imperfect competition are:

1. a significant market share from individual manufacturers;

2. the presence of barriers to entry into the industry;

3. heterogeneity of products;

4. imperfection (inadequacy) of market information.

As we will see later, each of these factors individually and all of them together contribute to the deviation of the market equilibrium from the point of equality of supply and demand. So, sole manufacturer a certain product (a monopolist) or a group of large firms conspiring among themselves (a cartel) is able to maintain inflated prices without the risk of losing customers - there is simply nowhere else to get this product.

As in the case of perfect competition, in imperfect markets one can single out the main criterion that allows one or another market to be classified in this category. The criterion for imperfect competition is a decrease in the demand curve and prices with an increase in the firm's output. Another formulation is often used: the criterion for imperfect competition is the negative slope of the demand curve (D) for the firm's products.

Thus, if in conditions of perfect competition the volume of output of the firm does not affect the price level, then in conditions of imperfect competition such an influence.

The economic meaning of this pattern is that a firm can sell large volumes of products with imperfect competition only by reducing prices. Or put another way: the behavior of a firm is significant across the industry.

Indeed, under perfect competition, the price remains the same, no matter how many products a firm produces, because its size is negligibly small compared to the total market capacity. Whether the mini-bakery doubles, keeps it at the same level, or completely stops baking bread, the general situation on the Russian food market will not change in any way and the price of bread will remain its value.

On the contrary, the existence of a relationship between production volumes and the price level directly indicates the importance of the firm in terms of the market. If, say, AvtoVAZ halves the supply of Zhiguli, then there will be a shortage cars and prices will go up. And so it is with all varieties of imperfect competition. Another question is that not only size, but also other factors, in particular, the uniqueness of products, can give importance to a company. But the relationship between the volume of output and the price level is always observed, if it is really a market of imperfect competition.

Pure (perfect) competition is competition that takes place in a market where a very large number of firms producing standard, homogeneous goods interact. Under these conditions, any firm can enter the market, there is no price control.

In a market of pure competition, no individual buyer or seller has much influence on the level of current market prices of goods. The seller cannot ask for a price higher than the market price, since buyers can freely purchase any quantity of goods they need at it. In this case, firstly, we have in mind the market for a certain product, such as wheat. Secondly, all sellers offer the same product on the market, i.e. the buyer will be equally satisfied with the wheat purchased from different sellers, and all buyers and sellers have the same and complete information about the market situation. Thirdly, the actions of an individual buyer or seller do not affect the market.

The mechanism of functioning of such a market can be illustrated by the following example. If the price of wheat rises as a result of increased demand, the farmer will respond by expanding his planting next year. For the same reason, other farmers will sow large areas, as well as those who have not done this before. As a result, the supply of wheat on the market will increase, which may lead to a drop in the market price. If this happens, then all producers, and even those who did not expand the area under wheat, will experience problems with its sale at a lower price.

Thus, a market of pure competition (or perfect) is one in which the same price is set for the same product at the same time, for which:

• Unlimited number of participants economic relations and free competition between them;
• Absolutely free access to any economic activity all members of society;
• absolute mobility of factors of production; unlimited freedom of movement of capital;
• · absolute awareness of the market about the rate of return, demand, supply, etc. (implementation of the principle of rational behavior of market entities (optimization of individual well-being as a result of income growth) is impossible without complete information);
• · absolute homogeneity of goods of the same name (absence of trademarks, etc.);
• the presence of a situation where no participant in the competition is able to directly influence the decision of another by non-economic methods;
• · spontaneous price fixing in the course of free competition;
• · the absence of monopoly (presence of one producer), monopsony (presence of one buyer) and non-interference of the state in the functioning of the market.

However, in practice, there cannot be a situation where all these conditions are present, therefore there is no free and perfect market. Many real markets operate according to the laws of monopolistic competition.

Perfect competition.

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

The market is open to everyone. Advertising campaigns are not so important and mandatory, since only homogeneous (homogeneous) products are offered for sale, the market is transparent and there are no preferences. In a market with such a structure, price is a given value. Based on the foregoing, the following options for the behavior of market participants can be deduced:

Price acceptor.

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

If the seller requests a lower price, then he will not be able to satisfy all the demand that will be directed to him, due to his insignificant market share, while there is no direct influence on the price from this particular seller.

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

Quantity regulator.

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

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

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

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

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

Imperfect competition.

From the previous point term paper it can be seen that thoroughly competitive markets allocate resources efficiently without government intervention. But this does not mean that the real market economies are effective. In practice, competition is, of course, imperfect.

Imperfect competition has always existed, but it became especially acute in the late 19th and early 20th centuries. due to the formation of monopolies. During this period, there is a concentration of capital, joint-stock companies arise, and control over natural, material and financial resources is strengthened. The monopolization of the economy was a natural consequence of a large jump in the concentration of industrial production under the influence of scientific and technological progress. Professor P. Samuelson emphasizes this circumstance: “The economy of large-scale production may have certain factors that lead to the monopolistic content of business organization. This is especially evident in the rapidly changing field of technological development. It is clear that competition could not last long and be effective in the sphere of an innumerable number of producers.

Examples of imperfect competition are monopolistic and oligopolistic competition.

Monopolistic competition.

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

Thus, firms in the market of monopolistic competition compete not only (and even not so much) through prices, but also through worldwide differentiation of products and services. Monopoly in such a model lies in the fact that each firm in terms of product differentiation has, to some extent, monopoly power over your product; it can raise and lower the price of it regardless of the actions of competitors, although this power is limited by the presence of manufacturers of similar goods. In addition, on monopoly markets along with small and medium-sized firms.

In this market model, firms tend to expand their area of ​​preference by individualizing their products. This happens, first of all, with the help of trademarks, names and advertising campaigns, which clearly highlight the differences in goods.

Monopolistic competition differs from perfect polypoly in the following ways:

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

Oligopolistic competition.

An oligopoly is characterized by a small number of participants in competition - when a relatively small (within a dozen) number of firms dominates the market for goods or services. Examples of classic oligopolies: the "big three" in the United States - General Motors, Ford, Chrysler.

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

Imperfect competition is competition in which individual producers have the ability to control the prices of the products they produce.

Features of imperfect competition

Unlike the perfect competition market model, which is an abstraction and practically does not exist in real life, but only in theory, the imperfect competition market is found almost everywhere. Most real markets in the modern economy are markets of imperfect competition.

Signs of imperfect competition:

1. the presence of barriers to entry into the industry;
2. product differentiation;
3. the main share of sales is accounted for by one or several leading manufacturers;
4. the ability to control all or part of the price of their products.

Under conditions of imperfect competition, the equilibrium of the firm (i.e., when MC = MR) will come when the average cost does not reach its minimum level, and the price is higher than the average cost:

(MC=MR)< AC < P

There are many examples of imperfectly competitive markets. These include the market of carbonated drinks led by the leading companies Coca-Cola and Pepsi, the car market (Toyota, Honda, BMW, etc.), the market of household appliances and electronics (Samsung, Siemens, Sony), etc.

There are such types of imperfect competition as monopoly, oligopoly and monopolistic competition.

Types of imperfect competition

Table. Types of imperfect competition in the market.