Examples of competition in the economy. Monopolistic competition: examples

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:47

Studying economics, students are faced with such a concept as competition. Examples can be found in absolutely any field of this science. In the specialized literature, competition is understood as rivalry between market participants. From this article you will learn what competition in the market can be, examples and conditions for the formation of its prerequisites.

For example, the rivalry of sellers of the same goods. Each of them is interested in customers buying products from him, and not from a competitor. In the article, the words "seller" and "manufacturer" will be used in similar meanings, denoting an enterprise that provides services.

The brightest examples of competition in the economy are still best viewed in those market segments in which the manufacturer has grown.

There are two types of competition: perfect and imperfect.

Perfect competition

It is understood as a state of the market in which no one can influence the price of goods. It is understood that the cost of goods is determined only by the cost of its production. Givenin the form of competition, neither the state nor other sellers influence pricing.

In the current state of market relations, there is no perfect competition. Examples of it can only be found in books. In a market where such competition exists, there must be a large number of sellers producing a product with similar characteristics.

Perhaps, if such a market existed, it would look like the modern competition of firms. The examples would be slightly different, but the essence of the concept would remain the same.

Only in this variant can the price of goods be set sensibly. In addition, sellers will strive to increase their market share by improving product features, service, 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 state of competition in the market - from price regulation by the state to various collusions of large market players. Unfair competition, examples of which will be given 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 take them in order.

Monopoly

This subspecies is considered the complete opposite of such a concept as perfect competition. Examples can be found in the oil and gas sector of the economy. Monopoly implies the existence of a single seller of services in the market. It can be at the regional, national, international level. This type is called so: "unfair competition". Examples may be: supply, transportation of natural gas, oil production and others.

Mandatory conditions for such competition:

1. Single seller. For example, there can be only one seller of bananas in the fruit market. Everyone will buy only from him and on his terms, because there are simply no other sellers or they are prohibited by law.
2. The only item on the market. It is understood that there are no analogues of the goods being sold, and no one can replace them with anything.
3. No free market access for other sellers. This situation mainly happens due to the restrictions that the state sets. That is, there are no prerequisites or legal possibilities for the functioning of other enterprises in the monopoly sphere on the market.

Immediately it should be noted that there is such a thing as a natural (natural) monopoly. This is a subspecies of monopoly competition, which is often formed artificially. Usually, such a monopoly is created by the state itself due to the large excess of benefits over negative points. Such examples of competition in Russia: AOA Gazprom, OAO Rosneft.

Many economists agree that, operating in the market, a monopoly enterprise is not interested in improvingthe quality of their services, as there is no need for this. One can argue with this assumption, because there are areas in which the functioning from the economic side will simply be inefficient or even impossible.

Monopolistic competition

Monopolistic competition, examples of which can be found in almost any area of the economy, is inherent in those markets where there are many sellers. Merchants sell goods that are similar in their characteristics, but the products cannot be called identical, and they cannot fully replace competing products.

A market that has developed monopolistic competition has its own features that make it stand out:

1. Availability of various products that are similar in most characteristics. That is, the market is filled with homogeneous products. But at the same time, each has its own characteristics, and it is not possible to replace it with another option by 100%.
2. Presence in the market of a large number of sellers. For example, there are many manufacturers of household appliances, but at the same time, the products of each of them have their own technological features.
3. Significant competition among sellers, which is not reflected in their pricing policy, indicates that there is monopolistic competition in the market. Examples can be given for a long time, but the main thing is that there are no absolute substitute products. Let's get back to TVs. Manufacturers are constantly improving their technologies. Even those who produce approximately the same characteristicsTVs set different prices. The buyer first of all buys not a device, but a brand that he trusts. Therefore, manufacturers do not pay as much attention to the prices of competitors as they could with perfect competition.
4. Relatively easy access for new sellers to enter the market. There are few barriers to this, and almost anyone who really wants to get on it can do it.

Examples of types of competition that belong to the 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 an increasing mass of customers.

Oligopoly

An oligopoly is a kind of competition when a small number of large sellers compete with each other in a market. If 3-4 large companies are fully capable of satisfying consumer demand, then such a market will have the following signs of an oligopoly:

1. 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 firm can be completely replaced by products of another.

   

   An example of a differentiated monopoly is the tobacco industry. Cigarettes, despite their similarity, have their own characteristics. This product can only be partially replaced.

2. High impactsellers on the price of goods. Due to the fact that each seller occupies a fairly large segment, it can be said that the policy of one such large player has a direct impact on the entire market.
3. The entry of new sellers into the market has barriers, but is still real. There may be various requirements for sellers established at the legislative level, subject to which access to market entry is opened.

The following examples of competitive Russia can be given: the sector of oil products and other energy carriers.

It is also worth highlighting a few basic ways or schemes through which various variants of imperfect competition appear. Some of them are completely natural, and some are artificially created by the sellers themselves or the state.

There are six paths.

Economic path

This path is a natural result of serious competition between major players. Gradually, enterprises absorb each other, increasing in size. Over time, there are fewer and fewer players on the market, and the influence of each of them is increasing.

This method is the most dangerous, since collusion between enterprises to raise prices for goods is possible, which is done regularly. The state is especially monitoring markets where such trends are observed in order to protect the rights of ordinary consumers, and that prices are always reasonable.

Advertising path

Let's take Coca-Cola as an example. Advertising of this drink is so diverse and multifaceted that it can be found everywhere. Thanks to massive advertisingCampaign cola is what every child and almost every adult wants to drink. And a PR campaign about some kind of “secret ingredient” that the company will never reveal made the drink individual and unique. And as a result, Coca-Cola has no competitors, there are just similar products.

Innovation path

Some companies, carrying out their activities, are constantly improving production processes, investing in innovative technologies. All this leads to the fact that such enterprises begin to stand out from others - they can produce more goods than competitors. At the same time, less money is spent on the production of one unit of goods. This implies the possibility of reducing the price of goods, which is fraught with cheaper goods in certain sectors of the market. Competitors, whether they like it or not, will also be forced to lower their price, perhaps even operating at a loss.

Technological path

This path is similar to the innovative one. But in the literature, it is distinguished as a separate type and is understood as an increase in production efficiency and the use of new technologies by large manufacturers, which allows them to exercise even greater influence on the market.

Nature way

There are some areas in which there is a so-called natural monopoly. It mainly occurs in industries where there is a seller who can independently satisfy the needs of the entire market. Moreover, using its technological capabilities, it can do this at a price that will be significantly lower than that of possible competitors.

State Way

Is one of the most negative, according to Western economists. It is typical where it is most beneficial for the state to establish full control over everything that happens on the market. Usually, special permits are applied for market participants, without which enterprises will not be able to operate on it. In such a market, competition is completely limited or it simply does not exist.

All examples of competition in the economy prove that there are patterns in the market that depend on the number of its participants, the level of government regulation of certain areas of the economy, demand, supply and other factors.