Are you an EPFL student looking for a semester project?
Work with us on data science and visualisation projects, and deploy your project as an app on top of Graph Search.
Concept
Imperfect competition
Summary
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. Imperfect competition usually describes behaviour of suppliers in a market, such that the level of competition between sellers is below the level of competition in perfectly competitive market conditions.
The competitive structure of a market can significantly impact the financial performance and conduct of the firms competing within it. There is a causal relationship between competitive structure, behaviour and performance paradigm. Market structure can be determined by measuring the degree of suppliers' market concentration, which in turn reveals the nature of market competition. The degree of market power refers to firms' ability to affect the price of a good and thus, raise the market price of the good or service above marginal cost (MC).
The greater extent to which price is raised above marginal cost, the greater the market inefficiency. Competition in markets ranges from perfect competition to pure monopoly, where monopolies are imperfectly competitive markets with the greatest ability to raise price above marginal cost.
The imperfect market faces a down-ward sloping demand curve in contrast to a perfectly elastic demand curve in the perfectly competitive market. This is because product differentiation and substitution occurs in the market. It is very easy for a consumer to change their seller which makes the consumer sensitive to price. The Law of demand also plays a very vital role in this market. As price increases, quantity demanded decreases for the given product. The demand curve in perfectly competitive and imperfectly competitive market has been illustrated in the image on the left.
Economists primarily use these assumptions of perfect competition for developing economic policy, including economic welfare and efficiency analysis.
Official source
About this result
This page is automatically generated and may contain information that is not correct, complete, up-to-date, or relevant to your search query. The same applies to every other page on this website. Please make sure to verify the information with EPFL's official sources.
Ontological neighbourhood
Related courses (6)
MGT-431: Information: strategy & economics
Introduction to the economics of information and its strategic ramifications. The main objectives are to use economic theory to understand strategic interactions in the presence of uncertainty, estima
MGT-454: Principles of microeconomics
The course allows students to get familiarized with the basic tools and concepts of modern microeconomic analysis. Based on graphical reasoning and analytical calculus, it constantly links to real eco
CIVIL-455: Transportation economics
The scope of the lecture is to provide the basic concepts in transport economics and introduce new ones for private and public transport and environmental issues. Demand, supply, welfare analysis an
Related publications (35)