Competition and monopoly, their characteristics

Competition and monopoly – related economic concepts. They are often even referred to as antonyms, as signs of signs opposite one another. Every manufacturer would like to be a monopolist in its market, but it is possible only to units. The economies of all countries are different, but have much in common.

Consider such concepts as competition and monopoly in detail. Perfect competition – perfect market model. It absolutely is no monopoly. On the market there are many similar properties of products from different manufacturers. Buyers when selecting products focus on its cost. The demand is almost entirely dependent on the price level. Market competition is very high, with many participants without the high cost and barriers to access. The logout process is also quite simple. All manufacturers are equal, as in a perfect market, there are no marks and brands. In the modern world it is impossible to meet this type of competition.

Monopoly-the antithesis of the above models. It is inherent in the presence of only one retailer that offers consumers the unique properties of the product. The firm itself controls the price of products, the volume of deliveries. Competition is completely absent in a monopoly. The leader initially dictate impossible conditions for market entry. In this form of economy may experience scarcity. Competition and monopoly are related as follows: the higher the percentage of the market of firms, the less monopolization.

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In the modern economy should not be viewed monopolies as enemies of society. They are essential in several industries. For example, communications, water, gas etc. These companies typically belong to the state, it is intended to control the activities of monopolies. These players on the market is necessary because it helps to save resources. Large companies have large capacity, high productivity and low costs.

In the market to create artificial monopolies. They arise when the company tries to protect its know-how. However, it imposes restrictions in the form of patents or licenses. Other firms do not have the right to use the invention and to award him its authorship. But it is worth considering that the natural functioning of the market and competition, and monopoly. It is their combination and occurs in the modern economy.

Monopolistic competition – the situation on the market when there are lots of producers offer similar but not identical product. In this situation only a small number of companies producing differentiated products. The difference when it comes to quality, price, after-sales service, intensity of advertising, vicinity to customers, and so the monopoly in this model there is the following feature – each firm has relative power to set their product price. There are small, medium and large enterprises-players.

Oligopoly – in the market a small number of participants. Usually their number is limited to a dozen firms. Manufacturers dominate in a particular market of goods (services). Products can be both homogeneous and differentiated. The first group includes semi-finished products (oil, ore, cement, steel, etc.), raw materials. Differentiated are markets for consumer goods. Firms agree among themselves about the level of prices. They want to reduce competition, as very few manufacturers. As a result, the oligopoly is extremely close to a monopoly.

So we looked at the importance of competition and monopoly in a market economy, what economic system they form.