BROWSE

Imperfect Competition

Definition

In economic theory, imperfect competition is a type of market structure showing some but not all features of competitive markets.

What is 'Imperfect Competition'

Imperfect competition exists whenever a market, hypothetical or real, violates the abstract tenets of neoclassical pure or perfect competition. Since all real markets exist outside of the plane of the perfect competition model, each can be classified as imperfect. The contemporary theory of imperfect versus perfect competition stems from the Cambridge tradition of post-classical economic thought.

Explaining 'Imperfect Competition'

The treatment of perfect competition models in economics, along with modern conceptions of monopoly, were founded by the French mathematician Augustin Cournot in his 1838 "Researches Ito the Mathematical Principles of the Theory of Wealth." His ideas were adopted and popularized by the Swiss economist Leon Walras, considered by many to be the founder of modern mathematical economics.

The New Language of Perfect and Imperfect Competition

One Englishman in particular, William Stanley Jevons, took the ideas of perfect competition and argued that competition was most useful not only when free of price discrimination, but also a small number of buyers or large number of sellers in a given industry.

Problems With Concepts of Imperfect Competition

The Cambridge school’s wholesale devotion to creating a static and mathematically calculable economic science had its drawbacks. Ironically, a perfectly competitive market would require the absence of competition. All sellers in a perfect market must sell exactly similar goods at identical prices to the exact same consumers, all of whom possess the same perfect knowledge. There is no room for advertising, product differentiation, innovation or brand identification in perfect competition.


Further Reading


Imperfect competition, information heterogeneity, and financial contagion
academic.oup.com [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …

Imperfect competition, agency, and financing decisionsImperfect competition, agency, and financing decisions
www.jstor.org [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …

Imperfect competition in financial markets: ISLAND vs NASDAQImperfect competition in financial markets: ISLAND vs NASDAQ
papers.ssrn.com [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …

15 Capital Structure and Imperfect Competition in Product Markets15 Capital Structure and Imperfect Competition in Product Markets
books.google.com [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …

Imperfect competition in the interbank market for liquidity as a rationale for central bankingImperfect competition in the interbank market for liquidity as a rationale for central banking
www.aeaweb.org [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …

Imperfect competition in financial markets: An empirical study of Island and NasdaqImperfect competition in financial markets: An empirical study of Island and Nasdaq
pubsonline.informs.org [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …

Liquidity and asset returns under asymmetric information and imperfect competitionLiquidity and asset returns under asymmetric information and imperfect competition
academic.oup.com [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …

Imperfect competition, risk taking, and regulation in bankingImperfect competition, risk taking, and regulation in banking
www.sciencedirect.com [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …

Pass-through as an economic tool: Principles of incidence under imperfect competitionPass-through as an economic tool: Principles of incidence under imperfect competition
www.journals.uchicago.edu [PDF]
… History; O - Economic Development, Innovation, Technological Change, and Growth; P - Economic Systems; Q … R - Urban, Rural, Regional, Real Estate, and Transportation Economics; Z - Other Special … Imperfect Competition, Information Heterogeneity, and Financial Contagion …



Q&A About Imperfect Competition


What are some drawbacks to the Cambridge schools wholesale devotion to creating a static and mathematically calculable economic science?

The Cambridge schools wholesale devotion to creating a static and mathematically calculable economic science had its drawbacks. Ironically, a perfectly competitive market would require the absence of competition. All sellers in a perfect market must sell exactly similar goods at identical prices to the exact same consumers, all of whom possess the same perfect knowledge. There is no room for advertising, product differentiation, innovation or brand identification in perfect competition.

Who was William Stanley Jevons?

William Stanley Jevons was an Englishman who argued that competition was most useful not only when free of price discrimination, but also a small number of buyers or large number of sellers in a given industry.

What is imperfect competition?

Imperfect competition exists whenever a market violates the abstract tenets of neoclassical pure or perfect competition.

How does imperfect competition differ from perfect competition?

Imperfect markets allow for more than one seller and/or more than one buyer within an industry; they allow for different products sold by different firms; they allow for varying degrees of information among buyers and sellers; they allow for differing levels of investment by competitors; they may have barriers to entry into an industry; and there may be government regulation involved with certain industries."