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Imperfect Competition Definition
Any competition in the market that does not have all the attributes of a perfect competition is imperfect competition. However, perfect competition is best practiced in theory than in reality, this means that it is not attainable in the real life market, this is why all real markets do not have perfect competition.
In most cases, competition in the market are imperfect rather than perfect given the fact that there is no explicitly defined model of perfect competition in the market. In perfect competition, activities and structure of the market are determined by market forces but this is not totally applicable in imperfect competition.
A Little More on What is Imperfect Competition
Monopolistic competition is an example of imperfect competition. Unlike perfect competition where competition is static and predictive, competition cannot be easily predicted in imperfect competition. Perfect competition can be attributed to Augustin Cournot, he developed it in 1838 and this concept was later made popular by Leon Walras. As at the time it was developed, perfect competition was helpful as it serves as an economic competition practicable in markets which would help solve many problems.
Imperfect competition is a violation of the standards of the perfect competition and it is often exhibited in real markets.
The New Language of Perfect and Imperfect Competition
The Cambridge tradition of post-classical economic thought gave rise to the theory of imperfect competition. The theory was developed to portray certain distortions and influences that are likely to occur in real markets unlike perfect competition that is purely theoretical and achievable. A scholar that contributed significantly to the creation of perfect competition was William Stanley Jevons who gave reasons why imperfect competition may occur in the market and the reason for such. With the development of imperfect competition, some real problems in the market such as monopoly competition, oligopsony, oligopoly, among others received a new language.
Problems With Concepts of Imperfect Competition
A typical perfect competition requires that the market witnesses no competition in any form, since it is a form of economic competition that is static and predictive, all activities in the market must follow an exact pattern. Products are not differentiated from one another, and no marketing is allowed in the market.
Generally, perfect competition is impracticable in the real market because if fails to capture certain sensitive issues in the real market. To fill this gap, the language created by the Cambridge tradition birthed a more attainable and less static theory of competition which is imperfect.
References for “Imperfect Competition”
- https://economictimes.indiatimes.com › Definitions › Economy
- https://www.investopedia.com › Insights › Markets & Economy