When studying economics, students are confronted with the concept of competition. Examples can be found in absolutely any field of this science. In specialized literature, competition is understood as rivalry between market participants. From this article you will learn how competition in the market can be, examples and conditions for the formation of its premises.
For example, rivalry of sellers of identical goods. Each of them is interested in that customers buy products from him, and not from a competitor. In the article, the words "seller" and "manufacturer" will be used in similar meanings, designating by them the company that provides services.
The best examples of competition in the economy are still better viewed in those market segments in which the producer has grown.
There are two types of competition: perfect and imperfect.
Perfect competition
By it is meant a state of the market in which no one can influence the price of a product. It is understood that the cost of goods is determined only by the cost of its production. With this type of competition, neither the state nor other sellers affect pricing.
In the current state of market relations, there is no perfect competition. Examples of it can only be found in books. In the market where such competition exists, there must be a large number of sellers who manufacture goods similar in characteristics.
Perhaps if such a market existed, it would look like a modern competition of firms. The examples would be slightly different, but the essence of the concept would remain the same.
Only in this option can the price of the goods be sensibly set. In addition, sellers will seek to increase their market share by improving the characteristics of goods, services, and marketing solutions.
Imperfect competition. Examples and types
In imperfect competition, everything is much more complicated than in the previous form. There are many different indicators that characterize this situation of competition in the market - from state price regulation to various conspiracies of major market players. Unfair competition, examples of which will be indicated below, leads to production stagnation and does not stimulate the enterprise to develop.
It is divided into several subspecies: monopoly, monopolistic competition, oligopoly. Let's sort them in order.
Monopoly
This subspecies is considered the exact opposite of such a concept as perfect competition. Examples can be found in the oil and gas sector of the economy. Monopoly assumes the presence of one seller of services on the market. It can be at the regional, national, international level. This kind is called so: "unfair competition". Examples may include: supply, transportation of natural gas, oil production, and others.
Mandatory conditions for such competition:
- Sole seller. For example, in the fruit market there can only be one seller of bananas. Everyone will buy only from him and on his terms, because there are simply no other sellers or they are prohibited by law.
- The only product on the market. It is understood that there are no analogues of the product being sold, and no one can replace it with anything.
- There is no free market access to other sellers. This situation mainly happens due to restrictions imposed by the state. That is, there are no prerequisites or legal opportunities for the operation of other enterprises in the monopoly sphere on the market.
It is immediately worth noting that there is such a thing as a natural (natural) monopoly. This is such a subspecies of monopoly competition, which is often formed artificially. Usually, a state creates such a monopoly due to the large excess of benefits over negative aspects. Such examples of competition in Russia are: JSC "Gazprom", OAO "Rosneft".
Many economists agree that, operating on the market, a monopolist enterprise is not interested in improving the quality of its services, since this is not necessary. One can argue with this assumption, because there are areas in which functioning on the economic side will be simply ineffective or completely impossible.
Monopolistic competition
Monopolistic competition, examples of which can be found in almost any area of the economy, is inherent in those markets in which there are many sellers. Traders sell similar products in terms of their characteristics, but the products cannot be called identical, and it is not able to completely replace competing products.
The market in which monopolistic competition has developed has its own characteristics that distinguish it:
- The presence of various products that are similar in most respects. That is, the market is filled with homogeneous products. But at the same time, each one has its own peculiarities, and there is no way to replace it with another option for 100%.
- The presence in the market of a large number of sellers. For example, there are many manufacturers of household appliances, but the products of each of them have their own technological features.
- Significant competition among sellers, which does not affect their pricing policy, suggests that there is monopolistic competition on the market. Examples can be given for a long time, but the main thing is that there are no absolute substitute products. Let's go back to the same TVs. Manufacturers are constantly improving their technology. Even those who produce televisions with approximately the same characteristics set different prices. The buyer in the first place is not the device, but the brand that he trusts. Therefore, manufacturers do not pay so much attention to the prices of competitors, as it would be with perfect competition.
- Relatively easy access for new sellers to enter the market. There are few obstacles to this, and almost everyone who really wants to get on it can do it.
Examples of types of competition that belong to an imperfect form can be found even in your phone - these are SIM cards of one of the mobile operators. It is in this area that a large number of companies are trying to attract a growing mass of customers.
Oligopoly
Oligopoly is called this type of competition, when a small number of large sellers competing among themselves are functioning in any market. If 3-4 large companies are fully able to satisfy consumer demand, then such a market will have the following signs of oligopoly:
- Market products can be both homogeneous and differentiated. In this case, the products of the metal rolling industry can be attributed to a homogeneous oligopoly. Whatever the manufacturer, steel cannot be made unique. Such products of one company can be completely replaced by products of another.
An example of a differentiated monopoly is the tobacco sector. Cigarettes, despite their similarity, have their own characteristics. Such a product can only be partially replaced.
- High influence of sellers on the price of goods. Due to the fact that each seller occupies a sufficiently large segment, it can be said that the policy of one such major player has a direct impact on the entire market.
- Entry into the market of new sellers has barriers, but still real. Various legislative requirements for sellers may be established at the legislative level, upon compliance with which access to the market is opened.
The following examples of competitive Russia can be cited: the sector of oil products and other energy carriers.
It is also worth highlighting several basic methods or schemes by which various variants of imperfect competition appear. Some of them are completely natural, and some are created artificially by the sellers themselves or by the state.
Six paths can be distinguished.
Economic way
This path is a natural outcome of the serious competition of large players. Gradually, enterprises absorb each other, increasing in size. Over time, there are fewer players on the market, and the influence of each of them is growing.
This method is the most dangerous, since collusion between enterprises is possible to raise prices for goods, which is done regularly. The state especially monitors markets where similar trends are observed, in order to protect the rights of ordinary consumers, and so that prices are always reasonable.
Advertising way
We give an example of Coca-Cola. Advertising of this drink is so diverse and multifaceted that it can be found everywhere. Thanks to a large-scale advertising campaign, every child and almost every adult wants to drink Coke. And the PR company about some “secret ingredient” that the company will never reveal has made the drink individual and inimitable. And as a result, Coca-Cola has no competitors, there are just similar products.
Innovative way
Some companies, carrying out their activities, constantly improve production processes, invest in innovative technologies. All this leads to the fact that such enterprises begin to stand out among others - they can produce more goods than competitors. Moreover, less money is spent on the production of one unit of goods. This implies the possibility of lowering the price of goods, which is fraught with cheaper goods in certain sectors of the market. Competitors, whether they want it or not, will also be forced to lower the price, perhaps even working at a loss.
Technological path
This path is similar to the innovative one. But in the literature it is singled out in a separate form and is understood by it as an increase in the efficiency of production and the use of new technologies by large manufacturers, which allows them to exercise even greater influence on the market.
Natural way
There are some areas in which the so-called natural monopoly is present. It mainly arises in industries where there is such a seller who can independently satisfy the needs of the entire market. Moreover, using its technological capacity, it can do this at a price that will be significantly lower than that of potential competitors.
