Imperfect Market

Perfect competition and monopoly are two extreme types of market structures which are not likely to be found in real world economies. Monopoly, being a single seller, involves no competition from other producers, and can thus set its own price for the product it sells, while a firm under perfect competition is a price taker with no power to influence the market price. In the real world situations, most firms operate under conditions which are somewhere intermediate between these two extreme market structures of perfect competition and monopoly. These intermediate market structures fall in the category of imperfect competition. The word competition here denotes that these firms are not monopolies; they face some competition from the rivals in that industry who produce same or similar products. But they do have some influence on market price though not as much as is enjoyed by a monopoly firm. The word imperfect denotes that here competition is not perfect in the sense that firms operating in this market are not price takers, as is the case in a perfectly competitive market. Hence, the term imperfect competition or imperfectly competitive market denotes the absence of either perfect competition or pure monopoly, but a market situation which lies between these two extremes. “the word competitive emphasizes that we are not dealing with a monopoly, and the word imperfect emphasizes that we are not dealing with perfect competition” two such imperfectly market structures that we study here are monopolistic competition and oligopoly.