Competition and its types. perfect and imperfect market competition. What is the difference between perfect and imperfect competition Perfect type of competition

The market mechanism operates most effectively in conditions of free, or perfect, competition, which means such a state economic system when the influence of each participant economic process on the general situation is so small that it can be neglected.

Perfect competition is the simplest market structure, where the market behavior of sellers and buyers is to adapt to the equilibrium state of the market environment and in which:

1) sellers accept prices as data and cannot consciously influence them;

2) access to the industry for new sellers is not limited in any way;

3) sellers do not develop a joint strategy;

4) buyers are not able to influence prices;

5) complete market information is available to all trading participants.

A market structure in which the first four characteristics are met is sometimes called pure competition. Violation of one of the basic characteristics leads to imperfect competition. If a company operates in conditions of perfect competition, then it cannot influence market prices, i.e., it “agrees” with them.

There are three main types of imperfect competition:

Pure monopoly, when in the market one firm is the only seller of a product or service and the boundaries of the firm and the industry coincide;

Oligopoly, when there are a small number of firms in an industry;

Monopolistic competition, which is characterized by the presence on the market of a relatively large number of firms producing differentiated products.

Monopoly comes from the Greek words "monos" - one, "full" - sell, and occurs when an individual producer occupies a dominant position and controls the market for a given product for which there are no close substitutes. At first glance, such a situation is unrealistic and, indeed, occurs quite rarely on a national scale. However, if we take a more modest scale, for example Small town, then we will see that the situation of a pure monopoly is quite typical. In such a city there is one power plant, one Railway, the only airport, one bank, one large enterprise, one bookstore, etc. In the USA, 5% of the gross product is created under conditions close to a pure monopoly. In this case, the determining factor is not the size of the enterprise, but the share of its production in the output of goods on the market.

The first monopolies arose a long time ago and were associated with non-reproducible production conditions and the ability to dictate their terms to consumers. A monopoly occurs where barriers to entry into an industry are high. This may be due to economies of scale (as in the automobile and steel industries). There are other conditions for the formation of monopolies, such as a natural monopoly associated with non-reproducible elements of production (mineral deposits, fertile plots of land, etc.), the use of scientific and technical achievements, etc. Finally, an administrative monopoly may arise, supported state, subordinating legal proceedings, law enforcement, state security, etc. The state creates official barriers by issuing patents and licenses. Under US patent law, an inventor has exclusive control over his or her invention for 17 years.

Patents have played a huge role in the development of companies such as Xerox, Eastman Kodak, International Business Machines (IBM), Sony, etc. The monopoly position secured by a patent serves as an incentive for investment in R&D and thus amplification factor monopoly power. Entry into the industry is often heavily restricted through the issuance of licenses. The license can be granted to either a private company or government organization(a classic example is the history of the vodka monopoly in Russia).

On the demand side, the analogue of monopoly is monopsony. This is a market situation where there is only one buyer. With monopoly and monopsony, sellers and buyers have the opportunity to influence the pricing process. At the same time, a monopoly influences the price by changing the volume of production, and a monopsony influences the price by changing the size of purchases.

A monopoly does not expand production indefinitely. She does this until each additional unit of production generates more income than the cost of its production. The income and costs for each additional unit of output are called marginal. The monopoly's expansion of production is limited by the demand curve and rising marginal costs.

A monopolist may engage in price discrimination when it sells a product for which further resale is difficult or impossible, and when the monopolist is able to differentiate between consumers willing to purchase the product according to their ability and willingness to pay. If these conditions are met, then the monopolist divides the market into segments and sells in each of them the amount of its products that maximizes its profit.

Monopoly and monopsony are extreme cases of imperfect competition. Oligopoly is more common (from the Greek words: “lishe” - few, “full” - selling) - the bulk of goods are concentrated in several large sellers, and oligopsony - several large buyers. An example of an oligopoly is the three giants of the US automobile industry - General Motors, Ford Motor and Chrysler, which

together they produce over 90% of all cars in the country, although at the beginning of the 20th century. the number of American automobile firms was approaching 200 at the end of the 20s. their number did not exceed 50.

Oligopoly is the most common type of industry structure in modern industry. The very threat of potential invasion by new producers turns even a 100% monopoly into an oligopoly. A fundamentally new dilemma arises: to agree on cooperation and form a monopolistic association or to compete. The essence of the problem of oligopoly comes down to the interdependence of firms: when making decisions, each participant must take into account the possible reaction of competitors. An oligopoly, with varying strengths of competition, can produce results comparable to the situation of a “pure” monopoly and, naturally, all intermediate options.

Oligopolies use new way struggle for consumer demand - non-price competition. In this case, the struggle is based on technical production, high quality and reliability of products, more effective methods sales, the use of marketing, expanding the types of services provided and guarantees to customers, improving payment terms and other techniques.

A characteristic feature of oligopoly is general interdependence. An oligopoly occurs when the number of firms in an industry is so small that each of them is forced to take into account the reaction of competitors when forming its economic policy. Just as a chess player must take into account the possible moves of his opponent, an oligopolist must be prepared for various options for the development of the market situation as a result of different behavior of competitors.

General interdependence manifests itself both in conditions of intensified competition, and in conditions when an agreement is reached with other oligopolists and a tendency arises to transform the industry into a purely monopolistic one.

Monopolistic competition combines the features of a monopoly and a perfectly competitive market. Grocery stores, grocery stores, gas stations, and many other retailers operate under monopolistic competition.

The essence of monopolistic competition is that each firm sells a product for which there are many close but imperfect substitutes. As a result, each firm faces a downward sloping demand curve for its product. Differentiation can be related to the product itself (for example, different types of beer) or to the location of the store.

The ease of entry into the industry does not mean that there are no restrictions for doing so. These may be product patents, licenses, brand marks or trademarks. However, unlike a pure monopoly, patents are not exclusive in nature, since substitute goods are patented.

Competition- this is a struggle between participants economic activity for better production and sales conditions. There is a distinction between perfect and imperfect competition.

Perfect competition means that with complete mobility (mobility) of resources and goods, there are many sellers and buyers of absolutely identical products who have complete market information and cannot impose their will on each other. The market of perfect competition is actually an abstraction, since it is unlikely that at least one of the real markets corresponds to the described essence. If at least one of the conditions is violated, then imperfect competition. In imperfectly competitive markets, the degree of imperfection (i.e., the ability to dictate terms) depends on the type of market.

There are four main market models (structures) from the point of view of competition: pure competition, pure monopoly, monopolistic competition and oligopoly (the last three refer to imperfect competition).

Pure competition characterized by a large number

firms producing homogeneous (identical) products, the share of each firm in the market is very small, so they cannot influence the price, there are no barriers to entry into the market. Examples include markets for agricultural products under the dominance of farms, foreign exchange markets, since the conditions there are close to those of a perfectly competitive market.

Pure monopoly means that there is a single company in the industry that produces a unique product that has no substitutes; entry into the industry is effectively blocked, the firm's control over price is significant, the maximum possible under market conditions. Examples include the gas, water, electricity, transport, and utilities industries. Barriers to the entry of new participants into one or another of these industries are almost insurmountable. Monopoly can be natural or artificial.

A natural monopoly occurs either when the production of a product requires unique natural conditions, or in the case where the existence of several manufacturers in the industry is impractical. An artificial monopoly is created by collusion of producers.

Along with pure monopoly, there is also pure monopsony. It occurs when there is only one buyer in the market. A monopoly benefits the seller, while a monopsony provides a privilege for the buyer. There is also a bilateral monopoly, when there is one seller and one buyer in the industry. This situation, for example, is possible in the production of military products, when there is one manufacturer and one customer of these products - the state. At the same time, the situation in the domestic market is considered. However, pure monopoly and pure monopsony are quite rare.

Monopolistic competition characterized by a large number of firms producing differentiated products. Differentiated Products- These are products that satisfy the same need, but differ in quality, brand, packaging, after-sales service, etc. The market share of each firm is small, barriers to entry into the market are easy to overcome, and the ability of an individual firm to influence prices is limited within a narrow framework. Examples include the production of clothing, shoes, books, retail etc.

Oligopoly means that there are few (several) firms operating on the market that produce identical or differentiated products, the share of each firm in the market is significant, and it is difficult to enter the industry. An oligopoly is characterized by a significant influence of an individual firm on the prices of goods and strong interdependence firms in their market behavior. Examples include the metallurgical, automotive, and household appliance industries.

The transition to imperfect competition, monopolistic and oligopolistic structures occurred in a market economy at the end of the 19th century. based on the concentration and centralization of production and capital as a result of competition itself. The reasons for the emergence of monopolies include:

Economies of scale: the result is natural monopolies– industries in which the existence of a single firm is economically rational, since products can be produced by one firm at lower average costs than if they were produced by several firms;

Scientific and technological progress, i.e. development of new products, technologies, etc.;

Exclusive ownership of any productive resource, for example, establishing control over all oil fields;

Exclusive rights granted to a company by the state.

Monopolies, in an effort to maximize profits, can reduce production and raise prices for goods, which is contrary to the interests of buyers and society as a whole.

A competitive market environment must be protected from the emergence of a pure monopoly or oligopoly. This can only be achieved with government intervention, through antimonopoly policy.

Antimonopoly policy includes support for small and medium-sized businesses, dissemination of scientific and technical information, allowing reasonable competition from foreign firms, adoption and implementation of antitrust legislation. One of the first antitrust laws appeared in the United States in 1890 (the Sherman Act). Antimonopoly legislation covers two main areas:

Regulates the structure of the industry - market share controlled by one firm, and mergers companies, first of all, horizontal(in the same industry) and vertical(along the technological chain from the extraction of raw materials to its processing and delivery finished products consumer);

Pursues unfair competition, for example, price collusion, purchasing the assets of one company by another through dummies, etc.

The main purpose of using public funds is to achieve an optimal combination of different types of competition and prevent some of them from suppressing others and thereby weakening overall efficiency competitive environment. To form normally functioning competitive markets, appropriate the legislative framework and public institutions, effective monetary policy, measures to protect the interests of national producers in the world market. In modern Russian conditions the problem of protecting the competitive environment is quite acute, since the monopoly in many industries has been preserved since the times of the USSR. On March 22, 1991, the RSFSR Law “On Competition and Restriction of Monopolistic Activities in Product Markets” was adopted, the first normative act in Russia, aimed at developing competition. Changes and additions are constantly made to this law as the market situation changes. The latest changes were made on July 26, 2006. The Law and amendments to it define the concepts of monopoly high and low prices, the concept of “dominant position” of an economic entity, etc. The law prohibits such entities from abusing their market position. Article 10 of the Law is aimed at suppressing unfair competition. Article 17 - to prevent monopoly and oligopolistic mergers. The extreme measure applied to business entities that abuse their dominant position is the forced separation of business entities, as defined in Article 19.

The main difficulties in applying antimonopoly legislation are to determine the scale of the market in which a firm accused of monopolism operates and to prove the fact of unfair competition.

Evgeniy Malyar

Bsadsensedinamick

# Business Dictionary

Terms, definitions, examples

In reality, competition is always imperfect and is divided into types, depending on which condition corresponds to the market to a greater extent.

Article navigation

• Characteristics of perfect competition
• Signs of perfect competition
• Conditions close to perfect competition
• Advantages and disadvantages of perfect competition
• Advantages
• Flaws
• Perfectly competitive market
• Imperfect competition
• Signs of imperfect competition
• Types of imperfect competition

Everyone is familiar with the concept of economic competition. This phenomenon is observed at the macroeconomic and even everyday level. Every day, when choosing a particular product in a store, every citizen, whether he wants it or not, participates in this process. What kind of competition is there, and, finally, what is it even from a scientific point of view?

Characteristics of perfect competition

To begin with, we need to adopt a general definition of competition. Regarding this objectively existing phenomenon that has accompanied economic relations since their inception, various concepts have been put forward, from the most enthusiastic to the completely pessimistic.

According to Adam Smith, expressed in his Inquiries into the Nature and Causes of the Wealth of Nations (1776), competition, with its “invisible hand,” transforms the selfish motives of the individual into socially useful energy. The theory of a self-regulating market assumes the denial of any government intervention in the natural course of economic processes.

John Stuart Mill, being also a great liberal and supporter of maximum individual economic freedom, was more cautious in his judgments, comparing competition to the sun. Probably, this outstanding scientist also understood that on a too hot day a little shade is also a good thing.

Any scientific concept involves the use of idealized tools. Mathematicians refer to this as a “line” that has no width or a dimensionless (infinitesimal) “point”. Economists have the concept of perfect competition.

Definition: Competition is the competitive interaction of market participants, each of whom strives to obtain the greatest profit.

As in any other science, economic theory adopts a certain ideal model of the market, which does not fully correspond to reality, but allows one to study the processes taking place.

Signs of perfect competition

The description of any hypothetical phenomenon requires criteria to which a real object should (or can) strive. For example, doctors consider a healthy person with a body temperature of 36.6° and a blood pressure of 80 over 120. Economists, listing the features of perfect competition (also called pure) also rely on specific parameters.

The reasons why it is impossible to achieve the ideal are not important in this case - they are inherent in human nature itself. Every entrepreneur, receiving certain opportunities to assert his position in the market, will definitely take advantage of them. And yet, hypothetical perfect competition is characterized by the following features:

• An infinite number of equal participants, which are understood as sellers and buyers. The convention is obvious - nothing unlimited exists within the boundaries of our planet.
• None of the sellers can influence the price of the product. In practice, there are always the most powerful participants capable of carrying out commodity interventions.
• The proposed commercial product has the properties of homogeneity and divisibility. Also a purely theoretical assumption. An abstract product is something like grain, but it also comes in different qualities.
• Complete freedom for participants to enter or leave the market. In practice, this is sometimes observed, but by no means always.
• The ability to seamlessly move production factors. Of course, it is possible to imagine, for example, an automobile plant that can easily be moved to another continent, but this will require imagination.
• The price of a product is formed solely by the relationship between supply and demand, without the possibility of influence from other factors.
• And finally, complete public availability of information on prices, costs and other information, in real life most often constituting a trade secret. There are no comments at all here.

After considering the above features, the following conclusions arise:

1. Perfect competition does not exist in nature and cannot even exist.
2. The ideal model is speculative and necessary for theoretical market research.

Conditions close to perfect competition

The practical usefulness of the concept of perfect competition lies in the ability to calculate the optimal equilibrium point of a firm taking into account only three indicators: price, marginal costs and minimum gross costs. If these figures are equal to each other, the manager gets an idea of ​​​​the dependence of the profitability of his enterprise on the volume of production. This intersection point is clearly illustrated by a graph in which all three lines converge:

Where:
S – amount of profit;
ATC – minimum gross costs;
A – equilibrium point;
MC – marginal costs;
MR – market price for the product;
Q – production volume.

Advantages and disadvantages of perfect competition

Since perfect competition does not exist as an ideal phenomenon in economics, its properties can only be judged by individual characteristics, which manifest themselves in some cases in real life (with the maximum possible approximation). Speculative reasoning will also help determine its hypothetical advantages and disadvantages.

Advantages

Ideally, such competitive relations could contribute to the rational distribution of resources and the achievement of the greatest efficiency in production and commercial activities. The seller is forced to reduce costs, since the competitive environment does not allow him to increase the price. The means to achieve advantages in this case can be new cost-effective technologies, high organization labor processes and all-round frugality.

In part, all this is observed in real conditions of imperfect competition, but there are examples of a literally barbaric attitude towards resources on the part of monopolies, especially if control by the state is weak for some reason.

An illustration of the predatory attitude towards resources can be seen in the activities of the United Fruit company, which for a long time ruthlessly exploited the natural resources of the countries of South America.

Flaws

It should be understood that even in its ideal form, perfect (aka pure) competition would have systemic flaws.

• Firstly, its theoretical model does not provide for economically unjustified spending on achieving public goods and raising social standards (these costs do not fit into the scheme).
• Secondly, the consumer would be extremely limited in the choice of a generalized product: all sellers offer virtually the same thing and at approximately the same price.
• Thirdly, an infinitely large number of producers causes low concentration of capital. This makes it impossible to invest in large-scale resource-intensive projects and long-term science programs, without which progress is problematic.

Thus, the position of the firm in conditions of pure competition, as well as the consumer, would be very far from ideal.

Perfectly competitive market

The exchange market type is considered to be the closest to the idealized model at the present stage. Its participants do not have bulky and inert assets, they easily enter and leave business, their product is relatively homogeneous (evaluated by quotes). There are many brokers (although their number is not infinite) and they operate mainly with supply and demand quantities. However, the economy does not consist of exchanges alone. In reality, competition is imperfect and is divided into types, depending on which condition corresponds to the market to a greater extent.

Profit maximization in conditions of perfect competition is achieved exclusively by price methods.

The characteristics and model of the market are important for determining the possibilities of functioning in conditions of imperfect competition. It is difficult to imagine that a huge number of sellers offer absolutely the same type of product, which is in demand among an unlimited number of buyers. This is an ideal picture, suitable only for conceptual reasoning.

In real life competition is always imperfect. At the same time, there is only one common feature of markets of perfect and monopolistic competition (the most widespread) and it consists in the competitive nature of the phenomenon. There is no doubt that business entities strive to achieve advantages, take advantage of them and develop success until they fully master all possible sales volumes. In all other respects, perfect competition and monopoly are significantly different.

Imperfect competition

Real, that is, imperfect competition, by nature tends to disturb the balance. As soon as the leading, largest and strongest players emerge in the economic space, they divide the market among themselves, without ceasing to compete. Thus, most often the matter is not in the degree of “perfection” of competition, but in the very nature of the phenomenon, which has limited properties of self-regulation.

Signs of imperfect competition

Since the ideal model of “capitalist competition” is discussed above, it remains to analyze its discrepancies with what happens in the conditions of a functioning world market. The main signs of real competition include the following points:

1. The number of manufacturers is limited.
2. Barriers, natural monopolies, fiscal and licensing restrictions objectively exist.
3. Entering the market can be difficult. Exit too.
4. Products are produced that vary in quality, price, consumer properties and other characteristics. However, they are not always divisible. Is it possible to build and sell half of a nuclear reactor?
5. Mobility of production takes place (in particular, towards cheap resources), but the processes of moving capacity themselves are very expensive.
6. Individual participants have the opportunity to influence the market price of a product, including through non-economic methods.
7. Information about technologies and pricing is not open.

From this list it is clear that the real conditions of the modern market are not only far from the ideal model, but most often contradict it.

Types of imperfect competition

Like any non-ideal phenomenon, imperfect competition is characterized by a variety of forms. Until recently, economists simply divided them according to the principle of functioning into three categories: monopoly, oligopoly and monopolistic, but now two more concepts have been introduced - oligopsony and monopsony.

These models and types of imperfect competition deserve detailed consideration.

Oligopoly

There is competition in the market, but the number of sellers is limited. Examples of this situation are large supermarket and retail chains or mobile operators. Entry into business is difficult due to the need for huge initial capital investments and permits. Market division often (not always) occurs on a territorial basis.

Monopoly

In most cases, legal norms do not allow complete individual takeover of the market. The exception is usually natural monopolies owned by the state, as well as suppliers who reasonably own the infrastructure for delivering the product (for example, electricity, gas, water, heat).

Monopolistic competition

It should not be confused with monopoly, although the terms are similar. This type of competition is characterized by the activity of a limited number of suppliers offering a product with similar consumer properties.

An example is the relationship between manufacturers, for example, household appliances and electronics. Their assortment is usually similar, but there are differences in quality and price. The market is divided between several leading brands. If one of them leaves, the vacated niche will be quickly divided among the remaining participants.

Monopsony

This type of imperfect competition occurs when the product produced can only be purchased by one consumer. There are types of products intended, for example, exclusively for government agencies (powerful weapons, special equipment). In economic terms, monopsony is the opposite of monopoly. This is a kind of dictate from a single buyer (and not the manufacturer), and it does not occur often.

A phenomenon is also emerging in the labor market. When there is only one, for example, factory in a city, then ordinary person opportunities to sell your labor are limited.

Oligopsony

It is very similar to a monopsony, but there is a choice of buyers, although small. Most often, such imperfect competition occurs between manufacturers of components or ingredients intended for large consumers. For example, some prescription component can only be sold in large quantities confectionery factory, and there are only a few of them in the country. Another option is that a tire manufacturer seeks to interest one of the car factories for regular supply of its products.

Competition can only exist under a certain market condition. Different types of competition (and monopolies) depend on certain indicators of market conditions. The main indicators are:

1. number of sellers and buyers;

2. nature of the product;

3. conditions for entering/exiting the market;

4. information and mobility.

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

Market structure	Quantity sellers and buyers	Character products	Entry conditions/ entering the market	Information and mobility
1. Perfect competition	Many small sellers and buyers	Homogeneous	Just. No problem	Equal access to all types of information
Imperfect competition: 2. Monopoly	One seller and many buyers	Homogeneous	Barriers to entry
3. Monopolist. competition	Lots of buyers; large but limited. number of sellers	Heterogeneous	Separate obstacles at the entrance	Full information and mobility
4. Oligopoly	Limited. number of sellers and many buyers	Heterogeneous and homogeneous	Possible obstacles at the entrance	Some restrictions regarding information and mobility

Perfect competition.

Let's consider character traits perfect competition.

1. The main feature of a purely competitive market is the presence of a large number of independently operating sellers, usually offering their products in a highly organized market. Examples include 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 from which seller the product is purchased. On competitive market the products of firms B, C, D, D, 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 products. This property follows from the previous two. Under perfect competition, each firm produces such a small portion of total output that increasing or decreasing its output will have no appreciable effect on total supply, or hence the price of the product. An individual competing manufacturer agrees to the price; A competitive firm cannot set the market price, but can only adapt to it.

In other words, the individual competing producer is at the mercy of the market; the price of a product is a given value that the manufacturer has no influence on. A firm can earn the same unit price for either more or less production. Asking a higher price than the existing market price would be futile. Buyers will not buy anything from Firm A for $2.05 if its 9,999 competitors sell an identical product, or an exact substitute, for $2 each. Conversely, since Firm A can sell as much as it thinks it needs for $2 each, there is no reason for it to charge anything lower, such as $1.95. Because it would cause its profits to decrease.

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

Imperfect competition.

Imperfect competition has always existed, but it became especially acute at the end of the 19th and beginning of the 20th centuries. in connection with the formation of monopolies. During this period, capital concentration occurs, joint stock companies, control over natural, material and financial resources is being strengthened. Monopolization of the economy was a natural consequence of a large leap in concentration industrial production under the influence of scientific and technological progress. Professor P. Samuelson especially emphasizes this circumstance: “The economy of large-scale production may have certain factors inherent in it that lead to the monopolistic content of business organization. This is especially true in the rapidly changing field of technological development. It is clear that competition could not last long 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 reasons. First, there is a trend toward fewer sellers in industries that have significant economies of scale and cost reductions. Under these conditions, production is cheaper for large firms, and they can sell their products at a lower price than small ones, which leads to the “crowding out” of the latter from the industry.

Second, markets tend to be imperfectly competitive when it is difficult for new competitors to enter the industry. So-called “barriers to entry” may arise as a result of government regulations that limit the number of firms. In other cases, it may simply be too expensive for new competitors to break into the industry.

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

Let's consider the characteristic features monopolies .

1. A monopoly is an industry consisting of one firm. One company is the only manufacturer of a given product or the only provider of a service; therefore, firm and industry are synonymous.

2. From the first sign it follows that the product of a monopoly 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 acceptable alternatives. The buyer must buy the product from the monopolist or do without it.

3. We emphasized that an individual firm operating under conditions of perfect competition has no influence on the price of a product: it “agrees with the price.” This is so because it provides only a small fraction of the total supply. A clear contrast is with a pure price-dictating monopolist: the firm exercises significant control over price. And the reason is obvious: it issues and therefore controls the total supply. With a downward-sloping demand curve for its product, a monopolist can cause a change in the price of the product by manipulating the quantity supplied of the product.

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

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

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

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 price of demand for it, leading to the seizure by the monopolist of the entire buyer's surplus.

In its pure form, perfect price discrimination is difficult to implement. Approaching it is possible in the conditions of individual production, when each unit of product is produced according to the order of a specific consumer, and prices are set under agreements with customers.

2. Price discrimination second degree- 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. Price discrimination of the second degree also includes the use of cumulative discounts depending on the time of sale of goods (services).

3. Third degree price discrimination(market segmentation) - selling 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 special demand characteristics, allows firms to pursue a product differentiation strategy to satisfy the needs of different groups of buyers, increasing the opportunities for selling 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 classify 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 elasticities of demand.

3. The original purchaser may not resell the product or service. If those who buy in the low-price portion of the market can easily resell in the high-price portion of the market, the resulting decrease in supply would increase the price in the high-price portion of the market. The policy of price discrimination would thus be undermined. This correctly means that service industries, such as the transportation industry or legal and medical services, are especially susceptible to price discrimination, see McConnell Campbell R., Brew Stanley L. Economics: Principles, Problems and Policies. In 2 vols.: Per. from English 16th ed. - M.: Republic, 1993. .

Thus, we can highlight the main pros and cons of a monopoly. The main advantage is that the scale of production allows you to reduce costs and generally save resources; The products of monopolistic companies are of high quality, which allowed them to gain a dominant position in the market. Monopolization acts to increase production efficiency: 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 raise prices and lower production volumes; they make excessive profits and 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 significant. Monopolistic competition does not require the presence of hundreds or thousands of firms, but a relatively small number, say 25, 25, 60 or 70.

The presence of such a number of firms implies several important signs of monopolistic competition. 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, the concerted actions of firms to limit production and artificially raise prices, is almost impossible. Finally, with the large number of firms in the industry, there is no sense of mutual dependence between them; each firm determines its policy without taking into account the possible reaction from firms competing with it. Competitive reactions 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 pure competition produce standardized, or homogeneous, products; Manufacturers, under conditions of monopolistic competition, produce variations of a given 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 functional features, materials, design and workmanship are extremely important 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 tips, graphs, drawings, etc. Any city of sufficient size has a number of retail stores selling men's and women's clothing that differ 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 customer experience. Its employees will pack your purchases and carry them to your car. A competitor in the form of a large retail store may allow customers to pack and carry their own purchases, but sell them at lower prices. A "one-day" cleaning of clothing is often preferable to an equivalent cleaning that takes three days. The courtesy and helpfulness of store employees, the firm's reputation for serving customers or exchanging its products, and the availability of credit are service-related aspects of product differentiation.

3. Accommodation. Products can also be differentiated based on placement and availability. Small mini-groceries or self-service grocery stores compete successfully with large supermarkets, despite the fact that they have much more a wide range of products and charge lower prices. Owners of small shops locate them close to customers, on the busiest streets, and they are often open 24 hours a day. For example, a gas station's close proximity to 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.

4. Sales promotion and packaging. Product differentiation may also result—to a large extent—from perceived differences created through advertising, packaging, and the use of brand names 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 consumers. Many consumers believe that toothpaste packaged in an aerosol can is preferable to the same toothpaste in a regular tube. Although there are a number of medications with properties similar to aspirin, strong sales and advertising can convince many consumers that Bayer and Anacin are superior and deserve a higher price than their better-known substitutes.

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 show preference for products from certain sellers and, within limits, pay higher prices for those products 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 focuses not only on price, but also on non-price factors such as product quality, advertising and conditions associated with the sale of the product. Because products are differentiated, it can be expected that they may 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 a strong emphasis on trademarks and brand marks as a means of convincing consumers that their products are better than those of competitors.

Oligopoly - a market structure in which the majority of output is produced by a handful of large firms, each of which is large enough to influence the entire market through its 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 the decisions of firms in other market structures. Each firm must make decisions not only about how customers will respond to its actions, but also about how other firms in the industry will respond, since their responses 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 secret price agreement. However, secret agreements are usually 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 its roots in two main reasons.

1. The firm's competitors can quickly and easily respond to price cuts. As a result, the possibility of significantly increasing one's market share is small; competitors quickly cancel out any potential sales increases in response to price cuts. And of course, there is always the risk that price competition will plunge participants into a disastrous price war. Non-price competition is less likely to get out of hand. Oligopolists believe that nonprice competition can provide more lasting advantages over competitors because product changes, improvements in production technology, and successful advertising gimmicks cannot be duplicated as quickly or as completely as price cuts.

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

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

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

Thus, we have considered competition corresponding to different market structures. In order of decreasing degree of competitiveness, they can be listed in the following order: perfect competition, monopolistic competition, oligopoly and monopoly. We found that the use of non-price competition methods is more characteristic of firms operating under oligopoly or monopolistic competition. While in conditions of perfect competition and monopoly this need disappears. In the next chapter we will dwell in more detail on the issue of price and non-price competition.

Competition– a form of mutual competition between economic entities to achieve better conditions production, for obtaining the greatest profit.

The methods distinguish between price and non-price competition.

Price competition involves selling goods or offering services at lower prices than competitors. In a developed market economy price reductions can occur either by reducing production costs or by reducing profits. Small firms can only reduce prices for a very short time for competitive purposes. Large companies may completely give up profits for a long time in order to force competitors out of the market. In the future, they can significantly increase the price and compensate for the losses incurred. Price reductions in conditions of price competition usually occur without reducing product quality or changing the product range. There are cases in history when rivalry between companies during price competition led first to the formation of zero and then negative prices (that is, competitors paid extra to customers for taking goods from them).

There are also direct and hidden price competition. In conditions direct price competition the company openly announces price reductions for goods and services. At hidden price competition The company improves the properties of its products, but increases the price by a disproportionately small amount.

Non-price competition involves the use of technological advantages, the provision of after-sales guarantees and services, and product advertising, which ultimately leads to the offering of higher quality goods on the market. In conditions of non-price competition, the manufacturer usually takes into account factors such as the environmental friendliness of the product, safety of consumption, and aesthetic properties. Trademarks and marks can be used as instruments of non-price competition. In modern conditions, non-price competition is much more important than price competition.

A special case of competition is unfair competition, representing, for example, the sale of goods at prices below costs, false advertising, industrial espionage, etc.

There are inter-industry, intra-industry, functional, perfect and imperfect competition.

Intra-industry competition- competition between producers of similar goods that satisfy the same need.

Inter-industry competition– competition between manufacturers of products that satisfy different needs. In this case, the competition is for the greatest profit. If the profit margin increases in one of the industries, there is a flow of capital into this industry from less profitable industries.

Functional competition– competition between producers of a particular product.

Perfect competition assumes the following conditions are met:

There are a large number of independent manufacturers available on the market; The production size of each is small relative to the size of the market - so none of them can influence the market price.

1. Firms competing in the market produce homogeneous products.

2. Buyers and sellers have complete information about prices.

3. Sellers act independently of each other, without agreeing on prices.

4. Firms can freely enter and exit the industry.

In conditions of perfect competition, a firm cannot influence the market price of a product; the price is set by the market. It is not profitable for the manufacturer to lower the price below the market price. Since he can freely sell the goods at a higher price; raising the price above the market price also makes no sense. Because buyers will begin to purchase products from competitors at a lower price. Under perfect competition, the demand curve is perfectly elastic and horizontal.

Imperfect competition– a market situation when at least one of the conditions of perfect competition is not met. Under conditions of imperfect competition, the seller is able to manipulate price and production volume in order to obtain maximum profit. There are the following main models of imperfect competition: monopoly, monopsony, monopolistic competition, oligopoly.

When there is only one seller in the market, then this seller has monopoly. In such a market, the seller can influence the price by controlling the volume of goods produced. The demand curve for a monopolist's product is the market demand curve. A monopoly's decisions are influenced by the demand for its product, the price elasticity of that demand, marginal revenue, and the marginal cost of producing the product.

Perfect competition is characterized by the inability of individual sellers to influence the price of the product that each of them sells. No single competitive firm captures a large enough share of the market supply to influence price. A monopoly is characterized by the concentration of supply in the hands of the owners of one single firm. The monopolist maximizes possible profits by raising the price and reducing the quantity of goods on the market.

The monopoly model is based on a number of assumptions:

· monopoly products do not have perfect substitutes;

· there is no free entry to the market;

· perfect awareness of the monopolist about the state of the market.

Natural monopoly- this is a state of the commodity market in which satisfying demand in this market is more effective in the absence of competition due to the technological features of production, and goods produced by subjects of natural monopolies cannot be replaced in consumption by other goods, and therefore the demand for these goods is in depends less on changes in the price of this product than the demand for other types of goods.

These types of commodity markets require special government regulation, aimed at achieving a balance of interests of consumers and subjects of natural monopolies, ensuring, on the one hand, the availability of goods sold by natural monopolies for consumers, and, on the other, the effective functioning of the subjects of natural monopolies themselves.

The law names natural monopolies as follows: transportation of oil and petroleum products through main pipelines; gas transportation through pipelines; services for the transmission of electrical and thermal energy; rail transportation; services of transport terminals, ports, airports; public electric and postal services.

To regulate and control the activities of natural monopoly entities, federal authorities regulation of natural monopolies, which, in order to exercise their powers, have the right to create their own territorial bodies and vest them with powers within their competence.

Clean monopolist- the only company on the market that is the buyer of the resource or its services offered in this market, and there are few or no alternative sales opportunities. A monopolist has sufficient power to influence the price of the resource services it purchases. The service supply curve of a monopolist's resource is upward sloping, so the monopolist can influence the price of the purchased resource by changing the quantity purchased.

Monopoly power is the ability of a single buyer to influence the prices of the resources it purchases. When firms with monopsony power increase their purchases, the price they must pay increases. Since such firms buy up a significant part of the entire market supply of the corresponding resource, a monopsonist firm cannot purchase all the resources it needs at the same price.

The following types of monopolies can be distinguished:

1. Natural monopoly. This is due to the fact that over long periods of time, average costs in an industry will be minimal if there is one rather than several competing firms operating in it.

2. Random monopoly. Occurs as a result of a temporary excess of demand over supply of a given product. It is temporary.

3. Artificial monopoly. It arises as a result of restrictions on the production of this type of product by the state.

A monopolist is able to increase profits through “price discrimination” - selling the same product to different consumers at different prices. In this case, it is important for the seller to know whether the buyer’s demand for a given product is elastic or not. If consumer demand is inelastic, the monopolist can raise the price of the product - demand will decrease by a small amount. Accordingly, in the case of elastic demand for a product, the price should be reduced. To determine groups of consumers with elastic and inelastic demand, a monopolist resorts to market segmentation. There is a danger that consumers who received a product at a reduced price will resell it at a price that is slightly higher, but not as high as for other consumers. Therefore, the monopolist is forced to limit the sale of goods to one person. Pure monopoly is more common in local markets than in national markets.

There are 3 types of price discrimination:

1. Each unit of goods is sold at the demand price for it, and since the demand price is different for different buyers, a discriminatory effect arises.

2. The price of products is the same for all consumers, but differs depending on the quantity of goods purchased.

3. Products are sold to different customers at different prices.

Price discrimination can only arise if the seller is able to segment the market, i.e. in one way or another to determine how elastic the demand of various buyers is. It is necessary to find out the buyer’s income level, as well as how much time he has to complete a purchase and sale transaction, how important this product is for him, etc.

Price discrimination can benefit both sellers and buyers. Sellers thus increase their income, and many consumers who would not have the opportunity to purchase products at a very high price also become buyers.

Monopolistic competition occurs when many sellers compete to sell a differentiated product in a market where new sellers may enter.

The product of each firm trading on the market is an imperfect substitute for the product sold by other firms. Each seller's product has exceptional qualities or characteristics that cause some buyers to choose its product over competing firms. Product differentiation means that the item sold in the market is not standardized. Differentiation can occur due to actual qualitative differences between products or due to perceived differences.

Product differentiation stems from many conditions:

· design features of the product;

· its shape, color and packaging;

· special trademark and trademark;

· a special set of services accompanying the sale of this product;

· specific location of the trading enterprise;

· personal qualities of the seller (reputation, business skills).

There are a relatively large number of sellers in a market, each of whom satisfies a small but not microscopic share of the market demand for a common type of product sold by the firm and its rivals. With monopolistic competition, the size of the firm's market shares generally exceeds 1%, i.e. the percentage that would exist under perfect competition. Typically, a firm accounts for 1% to 10% of market sales during the year.

In cases where there is the possibility of diversification, the volume of product sales depends on how successful the difference between this product and a competitor’s product is, and how much this difference can interest buyers. Improvement, deterioration or change in the product does not necessarily correspond to a change in price.

Although in a market with monopolistic competition each seller's product is unique, there are enough similarities between different types of products to group sellers into broad industry-like categories. A product group consists of several closely related but not identical products that satisfy the same need.

Oligopoly- a market structure in which there are not very many sellers involved in the sale of a product, and the emergence of new sellers is difficult or impossible. Products sold by oligopolistic firms can be either differentiated or standardized.

Typically, oligopolistic markets have between two and ten firms that account for half or more of a product's total sales. In oligopolistic markets, at least some firms can influence price due to their large shares of total output. Sellers know that when they or their rivals change prices or quantities produced, the consequences will affect the profits of all firms in the market. Sellers are aware of their interdependence. Each firm in the industry is expected to recognize that a change in its price or output will cause rival firms to react. Individual sellers in oligopolistic markets must consider the reactions of their competitors. The response that any seller expects from rival firms in response to changes in his price, output, or changes in marketing activities is a major factor determining his decisions. The response that individual sellers expect from their rivals influences the equilibrium in oligopolistic markets.

The actions of an oligopoly include attempts to control prices, advertise products, and set output levels. The small number of competitors forces them to consider each other's reactions to their decisions. In many cases, oligopolies are protected by barriers to entry similar to those imposed by monopoly firms. A natural oligopoly exists when a few firms can supply an entire market at lower long-term costs than many firms would have.

Oligopolistic markets have the following common features:

1. There are only a few companies operating on the market. The product they produce can be either standardized or differentiated.

2. Some firms in an oligopolistic industry have large market shares, so some firms in the market have the ability to influence the price of a product by varying its availability in the market.

3. Firms in the industry are aware of their interdependence. Sellers always take into account the reaction of their competitors when setting prices, sales volume targets, size advertising expenses or make other business arrangements.

There is no single model of oligopoly. A number of models have been developed to explain the behavior of firms in specific situations, based on what assumptions firms make about the reaction of their rivals. In an oligopoly, there is a tendency for profits to decrease due to competition. The effect of oligopolistic rivalry on prices forces firms to collude to reduce competition and increase profits.

Oligonomy- a situation in the market when the market is controlled by both several sellers and several buyers.

The goal of most mergers was to create oligonomies: they are protected from cyclical fluctuations because they can regulate both costs and prices. Small companies operating in such a market can choose one of three: to become larger through the same mergers; acquire unique technology and become indispensable; sell goods directly online.

Duopoly- (from Latin: two and Greek: I sell) a situation in which there are only two sellers of a certain product, not interconnected by a monopolistic agreement on prices, sales markets, quotas, etc. This situation was theoretically examined by A. Cournot in his work “Research mathematical principles of the theory of wealth" (1838). Cournot's theory comes from competition and is based on the fact that buyers announce prices and sellers adjust their output to these prices. Each duopolist estimates the demand function for the product and then sets the quantity to be sold, assuming that the competitor's output remains unchanged. According to Cournot, a duopoly occupies an intermediate position in terms of output between a complete monopoly and free competition: compared to a monopoly, the output here is slightly larger, and compared to pure competition, it is smaller.

Within the first type of monopolistic activity, the most common offense in the relationship between sellers (suppliers) and buyers (consumers), whose connections are based on contractual relations, is the manipulation of monopoly prices. It accounts for about 40% of all detected violations. Monopoly price- a special type of market price that is set at a level above or below the social value or equilibrium price in order to obtain monopoly income. As a rule, business entities set monopoly high prices for their products, exceeding the social cost or possibly the equilibrium price. This is achieved by the fact that monopolists deliberately create a zone of shortage, reducing production volumes and artificially creating increased consumer demand. The law defines a monopoly high price as the price of a product set by an economic entity occupying a dominant position in the product market in order to compensate for unreasonable costs caused by underutilization of production capacity and (or) to obtain additional profit as a result of a decrease in the quality of the product.

At a superficial glance, the most dangerous seem to be monopolistically high prices that directly benefit the “pocket” of an economic entity to the detriment of its competitors. In fact, monopolistically low prices often pose a much greater threat to freedom of competition. There are two known variants.

The first is that the reduced price of the purchased product is set by an economic entity occupying a dominant position in the product market as a buyer in order to obtain additional profit and (or) compensation for unreasonable costs at the expense of the seller. Such prices are imposed on weaker participants in market relations, as a rule, economic entities acting alone, who, when purchasing goods from them, cannot themselves protect their interests by market means, without outside interference. A reduction in price compared to social value or the possible equilibrium price is achieved through the artificial creation of a zone of excess production.

The second option for monopoly low prices is that the price of a product is deliberately set by an economic entity that occupies a dominant position in the product market as a seller at a level that generates losses from the sale of this product. The result of setting such a low price is or may be the restriction of competition by driving competitors out of the market. Only strong economic entities that can afford to trade “at a loss” for a long time can set and maintain low prices, monopolizing the market for certain goods. As a result, their competitors, unable to withstand the test of price, go bankrupt or leave the market.

It should be borne in mind that economic entities can double the collected “tribute” through the so-called “price scissors”: monopoly high prices are set for products sold and monopoly low prices for purchased products. These price levels move away from each other, like the diverging blades of scissors. This price movement is based on the expansion of areas of surplus and shortage of goods. It is typical for many manufacturing enterprises, which, in conditions of inflation, increase prices for their products. finished goods several times more than the increase in prices in the mining industries. Often, “price scissors” extract a good “tribute” from peasants for the industry processing agricultural raw materials, while simultaneously ruining them and causing agricultural production to decline.

The goal is to create conditions for fair competition and prevent market monopolization. state antimonopoly policy. It performs the most important functions in the development of the national economy, as it creates conditions for increasing the competitiveness of domestic producers and the economy as a whole.

The problematic nature of the practical implementation of antimonopoly policy is due to the fact that it uses primarily economic mechanisms that are not sufficiently developed in Russia. Accordingly, the effectiveness of antimonopoly policy is determined primarily by the development of the national market and the objectivity of state economic policy.

The fundamentals of antimonopoly policy are enshrined in Federal law“On Competition and Limitation of Monopolistic Activities in Commodity Markets,” adopted in 1991. The relatively established system of antimonopoly regulation was reformed after the 1998 crisis, when its shortcomings became obvious. As part of it, in 1999 the Federal Law “On Competition and Restriction of Monopolistic Activities in Commodity Markets”, and the State Committee on Antimonopoly Policy and Support of New Economic Structures was transformed into the Ministry of the Russian Federation for Antimonopoly Policy and Support of Entrepreneurship. From this time on, active regulation of competition in various spheres of the national economy began (for example, the Federal Law “On the Protection of Competition in the Financial Services Market”).

Due to the low efficiency and inconsistency of state regulation of the activities of natural monopolies, the Ministry of the Russian Federation for Antimonopoly Policy and Entrepreneurship Support was forced to judicially resolve many cases of violation of competition, for example, JSC Irkutskenergo, RAO UES of Russia.

Starting from 2004, there was a radical change in state antimonopoly policy, when, simultaneously with the general reform of the state apparatus, the Ministry of the Russian Federation for Antimonopoly Policy and Support of Entrepreneurship was reorganized into the Federal Antimonopoly Service. The main focus of the new structure was the creation of conditions for the development of competition and the development of a unified state policy to support competition. Despite this, in general, state antimonopoly policy has retained its inactive nature - it is simply recording cases of violation of competition.

There is a transition of the problem of competition from a purely economic category to the political field, which indicates the need to maintain it at the proper level throughout society. The activities of monopolists, while certainly necessary in some industries, should be increasingly regulated by law, primarily in the interests of the consumer.