Imperfect competition and perfect competition in economics are the staple concepts. In a perfectly competitive market, the prices are determined by forces outside the firm and the individual firm has no control over the prices it charges. In an imperfectly competitive market, there is some degree of control over prices by firms. It is a prerequisite for students solving economics assignment to clearly understand these concepts. In this blog, five major models of imperfect competition have been described to provide economics assignment study support to the students with the help of recent examples and cases for better comprehension.
A monopoly is a situation where one firm dominates in the production of a commodity or a service that has very less or no close substitutes. This makes possible for the monopolist to determine the price as well as the production quantity and at times comes with relatively high levels of profits compared to competitive market scenarios.
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Recent Example: In the case of the pharmaceutical industry, particular firms are endowed with patents for the products. For example, Pfizer had a completely exclusive right to the COVID-19 vaccine, Comirnaty, before other vaccines came into the market.
Case Study: A classic example is Microsoft control of the PC Operating systems in the late 1990s. Windows OS had 90% plus installations on the worldwide PCs hence Microsoft was able to dictate prices according to its choice.
Insights: Monopolies can result in an inefficient use of resources and increased prices for the consumer. However, they can also drive innovation because they are characterized by high profit capability.
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Oligopoly is a market situation in which a few dominant sellers control the industry or market. Such firms rely on each other and may exhibit cooperative strategies such as monopoly or aggressive competitive strategies such as price cut competition.
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Recent Example: Oligopoly exists in industries such as the airline industry. Many big companies such as Delta, American Airlines, and United Airlines continue to control the major share of the US market.
Case Study: The smartphone market best fits the category of an oligopolistic market, since Apple and Samsung have a large share. Some of their strategies include technological innovation and marketing which strongly influence the market.
Insights: Oligopolies make markets less competitive, which results in higher prices and less innovation when compared to other markets. However, they benefit from economies of scale and can invest heavily in research and development.
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It is a market structure that is characterized by many sellers though the product that they sell are radically similar but not identical. Each firm has a certain degree of control over its prices due the differentiating factors between the products they offer.
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Recent Example: This concept is evident in the restaurant industry exhibiting monopolistic competition. Every restaurant can have different atmosphere and offers different selection of meals, thus differing from other restaurants.
Case Study: One industry that can be used to explain this model well is the fashion industry. Zara, H&M, and Gap are some of the firms that sell clothing or fashion accessory that have different mass appeal.
Insights: As a result of monopolistic competition, the market is flooded with diverse products offering choices for consumers. However, it may lead to increased expenditure in the area of advertising and branding.
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It is a specific type of an oligopoly where only two firms control the market within a particular sector. Each firm’s actions have a direct impact on the other and the Market as a whole.
Key Characteristics:
Recent Example: Integrated into the global credit card market, Visa and Mastercard are two of the biggest players in the industry. They are directly involved in the market through their competitive strategies and the fees they charge.
Case Study: The rivalry between Boeing Company and Airbus on the aerospace industry is a perfect example of the duopoly. These two companies have heavy rivalry in markets, innovations, and the contracts.
Insights: Duopolies may also result to high prices and lacks choices for consumers as the number of firms involved is limited. But at the same time, it creates competition that forces each firm to be innovative and be efficient in its operations.
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A contestable market is the one where the threat of new entrant keep the price at competitive levels, even if the market is controlled by few firms.
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Recent Example: The technology industry and particularly the software industry can be considered as a contestable market. New startups such as Canva, and OpenOffice, compete with huge corporations including Microsoft and Adobe to ensure that their prices remain affordable.
Case Study: The airline industry can also be viewed as a contestable market due to its low barriers to entry and exit. The threat of new entrants keeps airlines on their toes.
Insights: Contestable markets can lead to lower prices and more innovation, like fully competitive markets. The ease of entry and exit is crucial for maintaining competitive pressure.
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Economics students find it difficult to study imperfect competition since it entails trying to understand complex structures in the market such as monopoly, oligopoly, and monopolistic competition. The differences between such kinds of markets as, for example, oligopoly and duopoly often cause a lot of confusion. Also, the cognitive aspect of the subject involves the use of mathematical models to examine the behaviors and outcomes of specific markets and learning the interactions of players through game theory.
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Q: What is imperfect competition in economics?
Imperfect competition is used to describe market structures where prices are influenced by the firms to some extent. These structures include monopoly, oligopoly, monopolistic competition, and duopoly.
Q: How can your service help me with my economics assignment?
We provide detailed explanation for every question, support with real life examples, mathematical equations, graphs and strategic analysis. We also provide assignment evaluation services, feedback and learning plans for each student.
Q: How do you assist with case studies?
We assist students in reading, comprehending, analyzing and making strategic solutions to the case problems. We provide insights and use visualization tools to present the analysis.
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Our professionals review your assignment solutions and provide critical pointers that highlights the strengths and weaknesses of your work and suggest ways to enhance your performance.
Q: Can I get help with understanding game theory and strategic interactions?
Yes, we assist in the explanation of game theory and how it can be used in oligopolistic markets. Our specialists provide examples and tasks that really encourage you to understand and apply these concepts.
