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In economics, imperfect competition refers to a situation where the characteristics of an economic market do not fulfil all the necessary conditions of a perfectly competitive market. Imperfect competition causes market inefficiencies, resulting in market failure . [ 1 ]
The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. The elements of Market Structure include the number and size of sellers, entry and exit barriers, nature of product, price, selling ...
Agents in a market can gain market power, allowing them to block other mutually beneficial gains from trade from occurring. This can lead to inefficiency due to imperfect competition, which can take many different forms, such as monopolies, [17] monopsonies, or monopolistic competition, if the agent does not implement perfect price discrimination.
Imperfect competition was a theory created to explain the more realistic kind of market interaction that lies in between perfect competition and a monopoly. Edward Chamberlin wrote "Monopolistic Competition" in 1933 as "a challenge to the traditional viewpoint that competition and monopolies are alternatives and that individual prices are to be ...
The book discusses the views of Alfred Marshall and Arthur Cecil Pigou on competition and the theory of the firm. Marshall believed that competition was imprecise, with prices being influenced by the rise and fall of demand. He also used the analogy of trees in a forest to explain how firms grow and establish a monopoly.
Imperfect competition is included in the JEL classification codes as JEL: D43, L13 Articles relating to imperfect competition , situations where the characteristics of an economic market do not fulfil all the necessary conditions of a perfectly competitive market , resulting in market failure .
English: Short-run equilibrium of a monopoly, oligopoly, or a firm under monopolistic competition. The grey box illustrates abnormal profit , though the firm could just as easily be making a loss. The same diagram could equally represent the longrun equilibria of monopoly and oligopoly.
Perfect and imperfect knowledge: Oligopolies have perfect knowledge of their own cost and demand functions, but their inter-firm information may be incomplete. If firms in an oligopoly collude, information between firms then may become perfect. Buyers, however, only have imperfect knowledge as to price, [23] cost, and product quality.