What is imperfect competition?
Imperfect competition is a term used to describe a market in which the conditions that characterize perfect competition are not present. In the real world, it is practically impossible to achieve the goal of perfect competition, in which no force has the power to manipulate the market. As a result, most markets around the world exhibit characteristics of imperfect competition. Some examples of markets that can be considered examples of this type of market include: oligopoly, monopolistic competition, monopoly and monopsony.
In this type of market, the consumption costs of the products do not approach the production cost due to the fact that the prices are controlled to some extent by the sellers and by the activities of the buyers. There are a number of factors that can lead to imperfect competition, and it's not uncommon to see multiple factors involved in a single market. These factors can sometimes be easy to identify, and in other cases they can be more obscure in nature or origin, making it difficult to determine what forces are at work in a market.
One problem is the lack of accurate information. Both buyers and sellers can withhold information to get a better deal, and this can contribute to imperfect competition. Sellers who sell differentiated products can also contribute, as the issue for consumers is less the final cost than the quality and associations with the product. Another characteristic that is sometimes observed in this market structure is the presence of barriers that can make it difficult to enter the market, such as high initial costs or strict government regulations.
More often than not, businesses and consumers have an interest in moving forward and staying there, whether in an individual business or in the market as a whole. As a result, they can work against each other, contributing to the development of imperfect competition. It is rare to find a market in which competition is perfectly balanced and can be considered “perfect”, not least because perfect competition does not necessarily generate the best profits for companies.
The idea of imperfect competition was introduced in the 20th century by Joan Robinson, a British economist. Robinson discussed the concept in 1933 and contributed other scholarly work to the world of economics. She spent a lot of time studying developing nations and was very interested in the manifestations of communism she saw in Russia and China. Her husband was also a noted economist.