What Is Pure Competition?

Perfect competition, also known as pure competition, is a market structure that is free from any obstruction and interference. It refers to markets where there are no companies or consumers that can affect prices. It is an ideal state of market competition in economics and one of several typical market forms. It can be proved that the result of perfect competition accords with Pareto optimality. Perfect competition is a market structure in which there are many sellers of homogeneous goods, and no seller or buyer can control the price, access is easy, and resources can be transferred from one user to another at any time. For example, many agricultural product markets can be viewed as infinitely similar to perfectly competitive markets, but they are not equivalent because perfectly competitive markets are idealized.

Perfect competition

Perfect competition usually refers to the market conditions where the following conditions prevail, that is, there are a large number of sellers and buyers with reasonable economic behavior in the market; the products are homogeneous and can be replaced without differentiation. ;

Perfect competition market features:

(1) There are many producers and consumers in the market.

(2) They are all just receivers of price and have equal competitive positions.

Under a completely competitive market structure, each buyer of each commodity and service faces many sellers, and he can move among these sellers at no cost; and each of each commodity and service sells The buyer also faces many buyers, and he can move among them without any cost. There is no phenomenon of power or force of people. The only thing that can decide

Demand

A large number of buyers, which means that the goods of each individual buyer

In a world without resources, there is bound to be a conscious interdependence or confrontation between sellers and buyers. Seller confrontation is manifested in a variety of ways: advertising, improvement of product quality, promotion, development of new products, and other measures. Confrontation between buyers can also stimulate specific behaviors: finding better deals, seeking to exploit

Sometimes there is a difference between pure competition and perfect competition, especially as in Edward Chamberlain's Monopoly Competition Theory, which distinguishes between pure competition and pure competition. Pure competition refers to competition without the existence of monopoly factors. Perfect competition also includes the improvement of other competition conditions, such as the full flow of resources and information, and does not specifically refer to the state of competition that does not include monopoly factors. This means that perfect competition is more restrictive than pure competition.

According to Chamberlain, the sufficient conditions for the existence of pure competition are:

(1) the homogeneity of the product,

(2) Relative to the total market share, the size of each seller is insignificant.

In order to achieve perfect competition, we must add several features, the most important of which is the entry barriers for new vendors that do not accompany resource movement. As we have already seen, the additional conditions associated with perfect competition include the continuous separability of inputs and outputs, as well as complete knowledge of current and future market conditions.