Department of Economic Theory

Course work

"Competition: essence, perfect and not perfect competition and market patterns. Monopoly in Russia.

Head: Performer:

Candidate of Economic Sciences, 1st year student of the Faculty of Economics and Physics

Associate Professor EF-13

Prokhorov S.S. Shevlyagina E.A.

St. Petersburg

Introduction ................................................ ................................................. ............................... 2

I. Competition, its essence and significance. Types of Competition............................................... 3

The concept of competition and its role in the economy .... 3

Types of competition .................................................................. ........................................... 4

II. Market models .................................................................. ................................................. ............. 5

Perfect competition .................................................................. ............................... 7

Monopolistic competition .................................................................. ................. fourteen

Oligopoly .............................................................. ................................................. ... nineteen

Monopoly. Monopoly in Russia ............................................................... ................ 24

Conclusion................................................. ................................................. ...................... 32

List of references .............................................................................. ............................... 35

At the end of the 20th century, our country embarked on the path of transition from a planned economy to a market economy, an integral part of which is competition as necessary condition business development.

During the years of the planned economy in our country, competition was not given due attention. It was announced the complete elimination of competition as a relic of the capitalist system and its replacement by conflict-free (with winners and without losers) social competition. Thanks to this, the Russian economy has turned into a system of highly monopolized industries. This has resulted in low production efficiency, excessively high levels of costs, and, in some industries, a deep technological lag behind cutting-edge scientific and technical developments.

Today we understand that the fiercer the competition in domestic market, the better prepared national firms are to fight for markets abroad, and the more advantageous are consumers in the domestic market both in terms of prices and product quality. After all, competitive products should have such consumer properties that would favorably distinguish them from similar products of competitors. It is competition that makes economic system country into a self-regulating apparatus, Adam Smith called it "the invisible hand of the market" for a reason.

With the transition of Russia to market methods of management, the role of competition in the economic life of society has increased significantly. At the same time, maintaining a competitive environment in Russian Federation, as in developed countries, at present, has become an important task of state regulation of the economy. This means that the study of competition and its role in the development of market relations is currently the most important task of economic research in our country.

One of the main problems of the transition period of the Russian economy, which has not been resolved so far, is the formation of competitive markets in the context of a decline in production and a crisis of non-payments that have engulfed all industries and regions of the country.

The problem of natural monopolies remains unresolved. Together, they form the production infrastructure of the state, they are the basis for the revival and further development of domestic industry, the development of the real sector of the economy. Therefore, the task of providing them financial stability takes on special importance.

Since the beginning of the 1990s, these problems have become acute for Russia. The success of economic reforms to a large extent depends on a balanced, well-considered system of state regulation of monopoly processes and competitive relations.

Problems of improving competition in Russian market, increasing the competitiveness of Russian goods, combating monopoly are extremely relevant in modern Russia.

The purpose of this work is to consider the concept of competition, its impact on the behavior of the company and the economy as a whole, to characterize various market models depending on the level of competition in them, to consider the problem of monopolization of the country's economy and to determine the main ways to solve this problem.

The most powerful factor dictating general terms and Conditions the functioning of a particular market is the degree of development of competitive relations on it. Etymologically word competition goes back to latin concurrentia, meaning clash, contest.

market competition called the struggle for the limited demand of the consumer, conducted between firms in the parts (segments) of the market accessible to them. Competition is the rivalry between participants in the market economy for the best conditions for the production, purchase and sale of goods. Competition - competitive work between producers for the most profitable areas of capital investment, markets, sources of raw materials and at the same time a very effective mechanism for regulating proportions social production. It is generated by objective conditions: the economic isolation of each producer, its dependence on market conditions, the confrontation with other commodity owners in the struggle for consumer demand.

Competition performs the most important function in a market economy - it forces producers to take into account the interests of the consumer, and hence the interests of society as a whole. In the course of competition, the market selects from a variety of goods only those that are needed by consumers. They are the ones that sell. Others remain unclaimed, and their production is reduced. In other words, outside a competitive environment, an individual satisfies his own interests, regardless of others. Under the conditions of competition the only way realization of one's own interest becomes taking into account the interests of others. Competition is the specific mechanism by which the market economy addresses fundamental questions what? as? for whom to produce?

The development of competitive relations is closely related to splitting economic power. When it is absent, the consumer is deprived of a choice and is forced either to fully agree to the conditions dictated by the producer, or to be completely left without the good he needs. On the contrary, when economic power is split and the consumer deals with many suppliers of similar goods, he can choose the one that best suits his needs and financial possibilities.

Competition is essential in the life of society. It stimulates the activity of independent units. Through it, commodity producers, as it were, control each other. Their struggle for the consumer leads to a reduction in prices, a reduction in production costs, an improvement in product quality, and an increase in scientific and technological progress. At the same time, competition exacerbates the contradictions of economic interests, greatly enhances economic differentiation in society, causes the growth of unproductive costs, and encourages the creation of monopolies. Without the administrative intervention of state structures, competition can turn into a destructive force for the economy. In order to curb it and keep it at the level of a normal stimulant of the economy, the state in its laws defines the "rules of the game" of rivals. These laws fix the rights and obligations of producers and consumers of products, establish principles and guarantees for the actions of competitors.

Competition is the rivalry of business entities to achieve the highest results in their own interests. Therefore, competition exists wherever there is rivalry between subjects to ensure their interests. As an economic law, competition expresses a causal relationship between the interests of business entities in competition and results in the development of the economy.

In the presence of competition in the market, manufacturers are constantly striving to reduce their production costs in order to increase profits. As a result, productivity is increased, costs are reduced, and the company is able to reduce prices. Competition also encourages manufacturers to improve the quality of goods and constantly increase the variety of goods and services offered. That. manufacturers are forced to constantly fight competitors for buyers in the sales market by expanding and improving the range of high-quality goods and services offered at more low prices. The consumer benefits from this.

Historically, competition arose under conditions of simple commodity production. Each small producer in the process of competition sought to create for himself the most favorable conditions for the production and sale of goods to the detriment of other participants in the market exchange. As the dependence of small commodity producers on the market increases and market fluctuations in prices for the goods they produce, the competitive struggle intensifies. There is a possibility of strengthening the economy, the use of hired workers, the exploitation of their labor, and capitalist competition arises. AT modern conditions competition also acts as an important means of developing production and exists in various forms.

According to the methods of implementation, competition can be divided into price and non-price.

Price Competition involves selling goods at lower prices than competitors. Price reduction is theoretically possible either by reducing production costs or by reducing profits. Small and medium-sized firms, in order to stay in the market, often settle for small profits. Large enterprises can afford to give up profit altogether for a while, in order to bankrupt competitors with the help of cheap products and force them out of the market. This method of ousting competitors from the market (the method of competition) is also known as the "price war". At one time, the American monopoly Coca-Cola used it when invading the markets of Latin America, and later Japanese firms promoted their goods in the United States and Western Europe in the same way. Recently, interest in price competition has revived again due to the introduction of technologies that save resources and, consequently, reduce costs.

Non-price competition is based on the offer of goods of higher quality, with greater reliability and service life, on the use of advertising methods and other methods of sales promotion.

By industry, intra- and inter-industry competition is distinguished.

Intra-industry competition - competition between entrepreneurs producing homogeneous goods for the best conditions for production and marketing, for obtaining excess profits.

Intersectoral competition is competition between entrepreneurs employed in various industries, due to the profitable investment of capital, the redistribution of profits. Since the rate of profit is influenced by various objective factors, its value in different industries is different. However, every entrepreneur, regardless of where his capital is used, strives to get a profit on it no less than other entrepreneurs. This leads to an overflow of capital from one industry to another: from industries with a low rate of profit to industries with a high one.

Competition is also divided into perfect (free) and imperfect (monopolistic).

For perfect competition is characterized by freedom from any kind of regulation: free access to factors of production, free pricing, etc. With this competition, none of the market participants can have a decisive influence on the conditions for the sale of goods.

monopoly competition differs mainly in that monopolies have the ability to influence the conditions for the sale of goods.

These two types of competition will be discussed in more detail in the following chapters.

¨ Key features of a perfectly competitive market

It should be borne in mind that the features of perfect competition mentioned above are not fully inherent in any of the industries. In its pure form, the conditions of perfect competition do not occur in reality, that is, perfect competition is nothing but a model of an ideal market economy. Such models, reflecting phenomena in a "sterile clean" form, serve as an important tool economic analysis. Individual industries can only approach the model to varying degrees.

Let us consider in turn the main features of perfect competition.

Under perfect competition, neither sellers nor buyers influence the market situation due to the smallness and multiplicity of all market participants. Sometimes both of these sides of perfect competition are combined, speaking of the atomistic structure of the market. This means that there are a large number of small sellers and buyers operating in the market, just as any drop of water is made up of a gigantic number of tiny atoms.

At the same time, purchases made by the consumer (or sales by the seller) are so small compared to the total volume of the market that the decision to lower or increase their volumes creates neither surpluses nor deficits. The aggregate size of supply and demand simply "does not notice" such small changes. So, if one of the countless beer stalls in Moscow closes, the capital's beer market will not become scarce, just as there will not be a surplus of this drink if, in addition to the existing ones, one more “point” appears.

In order for competition to be perfect, the goods offered by firms must meet the condition of product homogeneity. This means that the products of firms in the view of buyers are homogeneous and indistinguishable, i.e. products of different enterprises are completely interchangeable (they are complete substitute goods). The economic meaning of this provision is as follows: goods are so similar to each other that even a small price increase by one manufacturer leads to a complete switch in demand for the products of other enterprises.

Under these conditions, no buyer would be willing to pay a hypothetical firm more than he would pay its competitors. After all, the goods are the same, customers do not care which company they buy from, and they, of course, opt for the cheapest. That is, the condition of product homogeneity actually means that the difference in prices is the only reason why the buyer can prefer one seller to another. That is why, under conditions of perfect competition, there is no reason for the existence of non-price competition.

Indeed, it is difficult to imagine that one seller of potatoes on the "collective farm" market will be able to impose on buyers a higher price for his product, if other conditions of perfect competition are observed. Namely, if there are many sellers, and their potatoes are exactly the same. Therefore, it is often said that under perfect competition, each individual seller "receives the price" prevailing in the market.

The next condition for perfect competition is the absence of barriers to entry and exit from the market. When there are such barriers, sellers (or buyers) begin to behave like a single corporation, even if there are many of them and they are all small firms. In history, this is exactly how the medieval guilds (shops) of merchants and artisans acted, when, according to the law, only a member of the guild (shop) could produce and sell goods in the city.

Nowadays, similar processes are taking place in criminalized business areas, which, unfortunately, can be observed in many markets of large Russian cities. All sellers follow well-known unofficial rules (in particular, they keep prices no lower than a certain level). Any outsider who decides to bring down prices, and simply trade "without permission", has to deal with bandits. And when, say, the Moscow government sends disguised police officers to the market to sell cheap fruit (the goal is to force the criminal "owners" of the market to show themselves and then arrest them), then it fights precisely for the removal of barriers to entering the market.

On the contrary, typical for perfect competition no barriers or freedom to enter to the market (industry) and leave it means that resources are completely mobile and move from one activity to another without problems. Buyers freely change their preferences when choosing goods, and sellers easily switch production to more profitable products.

There are no difficulties with the termination of operations in the market. Conditions do not force anyone to stay in the industry if it does not suit their interests. In other words, the absence of barriers means the absolute flexibility and adaptability of a perfectly competitive market.

The last condition for the existence of a perfectly competitive market is that information about prices, technology, and likely profits is freely available to everyone. Firms have the ability to quickly and rationally respond to changing market conditions by moving the resources used. There are no trade secrets, unpredictable developments, unexpected actions of competitors. That is, decisions are made by the firm in conditions of complete certainty in relation to the market situation or, what is the same, in the presence of perfect information about the market.

The above conditions actually predetermine that, under perfect competition, market entities are not able to influence prices.

Market entities under conditions of perfect competition can influence the general situation only when they act in agreement. That is, when some external conditions encourage all sellers (or all buyers) of the industry to make the same decisions. In 1998, the Russians experienced this first hand, when in the first days after the devaluation of the ruble, all grocery stores, without agreeing, but equally understanding the situation, unanimously began to raise prices for goods of a “crisis” assortment - sugar, salt, flour, etc. Although the increase in prices was not economically justified (these goods rose in price much more than the ruble depreciated), the sellers managed to impose their will on the market precisely as a result of the unity of their position.

Firms operating in conditions of perfect competition (they are called competitive) perceive the equilibrium price level that has developed in the market as a given one, which none of the firms can influence. Such firms are called price-takers (from the English price - price, take - take) in contrast to firms - price-makers (make - do), which affect the level of market prices.

An example of a market that is close to the conditions of perfect competition is the global frozen fish market. A single fish-catching firm accounts for 0.0000107% of the world's fish catch. This means that even a 2-fold increase in the volume of fish production by one firm would lead to a decrease in the world price of fish by only 0.00254%, i.e., it would practically not affect its level. Agriculture is also considered one of the industries closest to perfect competition.

A firm under perfect competition

To begin with, we will determine what the demand curve for the products of a firm operating in conditions of perfect competition should look like. First, the firm accepts the market price, i.e. the latter is a given value for it. Secondly, the firm enters the market with a very small part of the total amount of goods produced and sold by the industry. Consequently, the volume of its production will not affect the market situation in any way, and this given price level will not change with an increase or decrease in output.

Obviously, under such conditions, the demand curve for the firm's products will look like a horizontal line (see Fig. 1). Whether the firm produces 10 units, 20 or 1, the market will absorb them at the same price P.

From an economic point of view, the price line, parallel to the x-axis, means the absolute elasticity of demand. In the case of an infinitesimal price reduction, the firm could expand its sales indefinitely. With an infinitesimal increase in the price, the sale of the enterprise would be reduced to zero.

The presence of perfectly elastic demand for the firm's product is called the criterion of perfect competition. As soon as this situation develops in the market, the firm begins to behave like a perfect competitor. Indeed, the fulfillment of the criterion of perfect competition sets many conditions for the company to operate in the market, in particular, determines the patterns of income.

Income (revenue) of the firm is called payments received in its favor when selling products. Like many other indicators, economic science calculates income in three varieties. total income(TR) name the total amount of revenue that the company receives. Average income (A R) reflects revenue per unit of product sold, or (which is the same) total revenue divided by the number of products sold. Finally, marginal revenue(MR) represents the additional income generated from the sale of the last unit sold.

A direct consequence of the fulfillment of the criterion of perfect competition is that the average income for any volume of output is equal to the same value - the price of the goods and that the marginal income is always at the same level. Let's say, if the market price of a loaf of bread equals 8 rubles, then the bread stall acting as a perfect competitor accepts it regardless of the volume of sales (the criterion of perfect competition is satisfied). Both 100 and 1000 loaves will be sold at the same price per piece. Under these conditions, each additional loaf sold will bring the stall 8 rubles. (marginal income). And the same amount of revenue will be on average for each loaf sold (average income). Thus, equality is established between average income, marginal income and price (AR=MR=P). Therefore, the demand curve for the products of an individual enterprise in conditions of perfect competition is simultaneously the curve of its average and marginal revenue.

As for the total income (total revenue) of the enterprise, it changes in proportion to the change in output and in the same direction (see Fig. 1). That is, there is a direct, linear relationship: T R=P Q .

If the stall in our example sold 100 loaves of 8 rubles each, then its revenue, of course, will be 800 rubles.

Graphically, the curve of total (gross) income is a ray drawn through the origin with a slope: tg a = DTR/DQ = MR = P.

That is, the slope of the gross income curve is equal to marginal revenue, which in turn is equal to the market price of the product sold by the competitive firm. From this, in particular, it follows that the higher the price, the steeper the straight line of gross income will go up.

The goal of any firm is profit maximization. Profit (p) is the difference between total revenue (TR) and total costs (p) for the sales period:

p = TR - TC = PQ - TC.

It is easy to see that of the three variables on the right side of the equation, the main lever for controlling the volume of profit for the firm is the volume of production. Indeed, the price (P) is a constant under perfect competition, that is, it does not change. This is an external condition of the company's activity, which must be reckoned with, and not a factor that can be controlled. As for the costs (TC), they themselves largely depend on the volume of production. In other words, under conditions of perfect competition, the most important decisions of the firm are primarily related to the establishment of the optimal volume of production. But first it is necessary to find a criterion for the expediency of production.

Like many other indicators, this criterion is not the same for the short and long term.

If we talk about the long-term period, then it is obvious that such the criterion will be the presence of a non-negative economic profit (p>0). If economic losses appear in the long run, the owners of the company resort to its liquidation, i.e. to the closure and sale of the property. However, even if the owners of a loss-making company do not want to close it (say, persistently hoping for an improvement in the future), the closing is often carried out against their will. Indeed, in order to continue production, a long-term loss-making firm has to make loans that it cannot repay. Sooner or later, such a policy leads to bankruptcy (or insolvency), that. e. to the inability of the enterprise to pay its obligations. After the company is declared bankrupt (in court), the former owners are removed from managing it, and the property is sent to cover debts to creditors.

The institution of bankruptcy is one of the most important mechanisms for ensuring the social responsibility of entrepreneurs in a market economy. Having the freedom of entrepreneurship, i.e., the right to make any (legitimate) economic decisions solely at their own discretion, capitalists must pay for possible mistakes with the loss of their property. The threat of bankruptcy and the associated forced deprivation of property disciplines the entrepreneur, keeps him from adventurous projects, failure to fulfill obligations to partners, imprudent attraction borrowed money no way to return them.

In Russia, after the default of 1998, a wave of bankruptcies swept the country. Over 4,500 bankruptcy cases were initiated by arbitration courts in 1998, many times more than in all previous years combined. The list of large enterprises that went bankrupt is impressive: in metallurgy, these are the legendary ZapSib, Volzhsky Pipe Plant, KMK, etc.; in the energy sector, Kuzbassenergo, Pechorskaya, Nevinnomysskaya and Stavropolskaya State District Power Plants, Prokopyevskugol, Krasnoyarskugol; Soviet-era audio equipment manufacturer Vega (Berdsk), Novocherkassk Electric Locomotive Plant, Irbit Motorcycle Plant. Even in the “prosperous” oil industry, the bankruptcy procedure for the fifth largest company in the country, Sidanco, began. .

At first glance, it may seem that making a profit will determine the decision on the feasibility of production in the short run. However, in reality the situation is more complicated. Indeed, in the short term, part of the company's costs is permanent and does not disappear when production stops. For example, the rent for the land on which the enterprise is located will have to be paid regardless of whether the plant is idle or working. In other words, losses to the firm are guaranteed even in the event of a complete cessation of production.

The firm will have to weigh when the losses will be less. In the event of a complete shutdown of the plant, there will be no income, and the costs will exactly equal the fixed costs. If production continues, variable costs will be added to fixed costs, but income from the sale of products will also appear.

Thus, under unfavorable conditions, the decision to temporarily stop production is made not at the moment of the disappearance of profit, but later, when the losses from production begin to exceed the value fixed costs. The criterion for the feasibility of production in the short run is that losses do not exceed the size of fixed costs(|p|< TFC).

This theoretical position is fully consistent with economic practice. No one stops production when there are temporary losses. During financial crisis 1998 share of unprofitable industrial enterprises in Russia grew, for example, to 51%. But hardly anyone would consider the best way out of a difficult situation to stop half of the country's industry.

Thus, for a firm operating in the short run, there are three possible behaviors:

1. production for profit maximization;

2. production for the sake of minimizing losses;

3. termination of production.

Graphical interpretation of all three options is shown in fig. 2.

The figure shows the standard dynamics of the gross total costs of a certain firm and three variants of curves (more precisely, direct) of gross income that will develop: TR1 - at a high level of prices for the company's products, TR2 - at an average price level and TR3 - at a low one. As already noted, the gross income curve rises the steeper the higher prices.

It is easy to see that the gross income curve only in the first case (TR1) turns out to be on a certain section higher than the gross cost curve (TC). It is in this case that the firm will make a profit, and it will choose the level of production where the profit is maximum. Graphically, this will be the point (Q1) where the TR1 curve is above the TC curve by the maximum distance. The amount of profit (p1) is highlighted in fig. 2 with a bold line.

In the second case (TR2), the income curve is below costs throughout its entire length, i.e. there can be no profit. However, the gap between both curves - and this is how the size of the loss is graphically reflected - is not the same. Initially, the losses are significant. Then, as production grows, they decrease, reaching their minimum (p2) with the release of Q2 units of output. And then they start growing again. It is obvious that the release of Q2, units of production under these conditions is optimal for the firm, since it ensures that it minimizes losses.

Finally, in the third case, the gap between costs and income (curve TR3) only increases with the growth of production. In other words, losses increase monotonically. In this situation, it is better for the firm to stop production, resigned to the inevitable losses in this case in the amount of gross fixed costs (p3).

However, the termination of production does not mean the liquidation of the enterprise (firm). It's just that the company is forced to temporarily stop production. It will stand until the market price increases to such a level that production begins to acquire some meaning. Or the company will be convinced of the long-term nature of the price reduction and will finally cease to exist.

Examples of such situations are temporary shutdowns of Russian enterprises for several months or even years, which, unfortunately, is not uncommon during the years of reforms. Either AZLK (“Moskvich”) stops production, then ZIL, or even the manufacturer of seemingly popular goods - the Mars factory near Moscow, which produces chocolate bars. There is no need to talk about countless stops of small enterprises against such a background.

Temporary stoppages of production in Russia have a certain specificity compared to those described in the theory. Namely, the low price, as a rule, is not formally their reason. The fact is that, according to our law, the sale of products below cost is simply prohibited, i.e., not only the situation P< АVСmin, но и куда более мягкий случай АТСmin >P > AVCmin can never add up. The factory always charges a price above this level.

But the objective law of economics cannot be canceled with the help of a legal norm. When the real market price falls below the cost, the company's products at the higher price assigned to them cease to be bought. Under these conditions, the company usually takes hidden forms, lowering prices. Namely, he agrees to a delay in payment, accepts less favorable proportions of the exchange of his products for other goods in barter transactions, etc. Most importantly, a lot of unsold products accumulate in the warehouse.

Stopping the enterprise in these conditions allows saving on variable costs (temporarily not paying wages, not purchasing raw materials, etc.). And during this time, wait for the receipt of money from their debtors and sell off the surplus of finished products.

So far, we have talked about competition only as a positive factor, but we should not idealize the market of perfect competition. Indeed, no type of imperfect competition has a set of properties characteristic of perfect competition: the minimum level of costs, the optimal allocation of resources, the absence of shortages and surpluses, the absence of excess profits and losses. In fact, when economists talk about self-regulation of the market, which automatically brings the economy to an optimum state - and such a tradition goes back to Adam Smith, we can talk about perfect competition and only about it.

However, perfect competition is not without a number of disadvantages:

1. Small businesses typical of this type of market are often unable to use the most efficient technique. The fact is that economies of scale are often available only to large firms.

2. The market of perfect competition does not stimulate scientific and technological progress. Really, small firms usually there is not enough money to finance long and expensive research and development work.

3. A purely competitive economy may not provide a sufficient range of consumer choice or new product development. Pure competition leads to the standardization of products, while other market structures (such as monopolistic competition and often oligopoly) produce a wide range of types, styles, and qualities of any product. This differentiation of the product expands the range of free choice of consumers and at the same time allows the most complete satisfaction of the preferences of the buyer. Critics of pure competition also point out that since it is not progressive in terms of the development of new production techniques, this market model is not conducive to the improvement of existing products and the creation of new ones.

Thus, for all its merits, the market of perfect competition should not be an object of idealization. The small size of companies operating in a perfectly competitive market makes it difficult for them to operate in a modern world full of large-scale technology and permeated with innovative processes.

¨ Common features of imperfect competition

The vast majority of real markets are markets of imperfect competition. They got their name due to the fact that competition, and hence the spontaneous mechanisms of self-regulation (the "invisible hand" of the market) act on them imperfectly. In particular, the principle of the absence of surpluses and deficits in the economy is often violated, which just testifies to the efficiency, perfection market system. As soon as some goods are in excess, and some are not enough, it is no longer possible to assert that all the available resources of the economy are spent only on the production of the necessary goods in the required quantities.

The prerequisites for imperfect competition are:

1. a significant market share from individual manufacturers;

2. the presence of barriers to entry into the industry;

3. heterogeneity of products;

4. imperfection (inadequacy) of market information.

As we will see later, each of these factors individually and all of them together contribute to the deviation market equilibrium from the point of equality of supply and demand. So, the only manufacturer of a certain product (monopolist) or a group of large firms conspiring among themselves (cartel) are able to maintain inflated prices without the risk of losing customers - they simply have nowhere else to get this product.

As in the case of perfect competition, imperfect markets one can single out the main criterion that allows one or another market to be assigned to this category. The criterion for imperfect competition is a decrease in the demand curve and prices with an increase in the firm's output. Another wording is often used: The criterion for imperfect competition is the negative slope of the demand curve ( D) on the company's products.

Thus, if under conditions of perfect competition the volume of a firm's output does not affect the price level, then under conditions of imperfect competition such an effect exists (this can be clearly seen in Fig. 3).

The economic meaning of this pattern is that a firm can sell large volumes of products with imperfect competition only by reducing prices. Or put another way: the behavior of a firm is significant across the industry.

Indeed, under perfect competition, the price remains the same, no matter how many products a firm produces, because its size is negligibly small compared to the total market capacity. Whether the mini-bakery doubles, keeps it at the same level, or completely stops baking bread, the general situation on the Russian food market will not change in any way and the price of bread will remain its value.

On the contrary, the existence of a relationship between production volumes and the price level directly indicates the importance of the firm in terms of the market. If, say, AvtoVAZ halves the supply of Zhiguli, then there will be a shortage of cars and prices will jump. And so it is with all varieties of imperfect competition. Another question is that not only size, but also other factors, in particular, the uniqueness of products, can give importance to a company. But the relationship between the volume of output and the price level is always observed, if it is really a market of imperfect competition.

¨ The main features of the market of monopolistic competition

Monopolistic competition is a form of imperfect competition. Monopolistic competition is a market structure in which a large number of firms produce interchangeable goods and services.

First of all, the term “monopolistic competition” draws attention to itself. He says that within the framework of this market structure, the features inherent in monopoly and perfect competition, which are antipodes, are combined. Monopolistic competition is related to perfect competition by a large number of sellers simultaneously acting on the market for a given product or service. But they offer not the same, but differentiated products, i.e., various interchangeable products that satisfy the same need ( different kinds soap, toothpaste, fashion models, economics textbooks, etc.). Each type of product in relatively small sizes can be produced by small firms. For example, there are many firms in the toothpaste market, but each of them produces a separate type of toothpaste and is a monopolist in its release. Any such firm has a competitor who is trying to take away the consumer from it and offer him a different kind of toothpaste. Therefore, all firms that produce toothpaste are competitors, despite the fact that they sell different types of toothpaste. It is no coincidence that they pursue an active advertising policy.

Using its position as a relative monopolist, the firm can afford to increase the price of its products, which a competitive firm cannot do under the threat of completely losing customers. In the context of offering differentiated products, many of the buyers will still not leave the market, since the seller takes into account their individual needs. For example, women of fashion will not stop making clothes at "their" tailor, even if he raises prices a little; the client of the hairdressing salon will also not leave "his" master in such a case. Unlike an oligopolist, a firm operating under conditions of monopolistic competition does not take into account the response of competitors to its actions, since this is impossible to do in a large number of firms.

There are many firms operating on the market, and among them there are either no large ones at all, or they do not have decisive advantages over small ones and coexist with them. The barriers to entry into such a market are relatively low: opening an upholstered furniture workshop or a fashionable hairdressing salon does not require large capital, and it is difficult for competitors to prevent this. Quitting the market is usually easy - there are always buyers ready to buy a small business.

Why, under such liberal conditions prevailing in markets of the type described, is competition still not perfect? The reason lies in the diversity, differentiation of the product.

The product produced by each company is somewhat different from the products of other companies. Any of the producers occupies a kind of position of a "mini-monopolist" (the only manufacturer of a specific narrow variety of a given product) and has a certain power in the market.

Each firm operating under monopolistic competition controls only a small share of the entire market for the corresponding product. However, product differentiation leads to the fact that the single market breaks up into separate, relatively independent parts (they are called market segments). And in such a market segment, the share of even a small company can become very large.

The enormous difficulties of Russian enterprises in adapting to the conditions of a market economy are a generally recognized fact. In some cases, the source of problems lies in the low differentiation of their products.

The fact is that in the Soviet era, enterprises produced everything according to common standards and technologies. Moreover, the assortment was extremely narrow: about a dozen varieties of cars were produced in the country, about the same number of TV sets, sausages, cheese, etc. Because of this, in a market economy, domestic enterprises were doomed to a tough competitive confrontation.

Product differentiation arises from the existence of differences between them in quality, service, advertising. Let's take a closer look at each of these product differentiation factors.

First of all, we emphasize that quality is not a one-dimensional characteristic, i.e. is not limited only to the assessment, a bad product or a good one. Even the basic consumer properties of the simplest products are surprisingly diverse. So, toothpaste should: a) clean the teeth, b) disinfect the oral cavity, c) strengthen the enamel of the teeth, d) strengthen the gums, e) taste good, etc.

And all these properties, only as an exception, can be harmoniously combined in one product. In many cases, a gain in one feature of a product inevitably leads to a loss in another. In this example, the introduction of effective detergents and disinfectants into the composition of the paste irritates the gums; the best medical pastes are rarely palatable. Therefore, already the choice of priorities in the main consumer qualities opens up opportunities for a wide variety of products. And they all become unique in their own way: one paste strengthens the gums better, the other tastes better, etc.

The basis for differentiation can also serve as additional consumer properties, i.e. those features of the product that affect the ease or convenience of its use (for example, different sizes packaging, packaging differences, etc.).

At the same time, practice shows that in a mature, saturated market, it is additional properties that determine the fate of goods. This, in particular, can be easily traced by observing the zigzags in the development of the market in post-reform Russia. For example, in the conditions of the commodity famine of 1991-1992. butter, if it appeared on sale, was usually in bulk or in random packages, namely in the form in which the given consignment of humanitarian aid arrived. With the saturation of the market by 1997, bright foil packages with oil packages of 200, 250 and 500 g became typical, occasionally there was solid (in plastic boxes) and souvenir packaging (barrels of Vologda oil). Manufacturers sought to improve the chances of selling their products by creating additional convenience for customers: someone needs a small pack, someone is more comfortable with a large one, and someone even wants to take a souvenir from Russia. Excessive demand after the devaluation of 1998 sharply reduced the saturation of the market and returned half-forgotten bulk butter to the shelves.

An important quality characteristic of a product is its location. For retail and many types of services, it is generally crucial. So, if the network of gas stations is rare, then the nearest gas station automatically becomes a monopolist in this area.

Finally, even imaginary qualitative differences between them can serve as the basis for product differentiation. For a long time, in particular, it has been known that a significant percentage of smokers on test trials are unable to distinguish “their” brand from others, although they always buy only it. Thus, from the point of view of the market behavior of the consumer, it does not matter whether the goods are really different. The main thing is that he thinks so.

Differences in service unite the second (after quality) large group of product differentiation factors. The fact is that for a wide group of products, especially for technically complex consumer goods and many industrial goods, the long-term nature of the relationship between the seller and the buyer is characteristic. An expensive car should work properly not only at the time of purchase, but throughout its entire service life.

The full cycle of service includes pre-sales service (assistance in choosing the right product; for industrial goods, this often involves conducting a whole study); service at the time of purchase (inspection, delivery, adjustment) and after-sales service (warranty and post-warranty repairs, ongoing improvements, advice on optimal operation).

Each of these operations can be performed to a different extent (or not performed at all). As a result, one and the same product, as it were, decomposes into a whole range of varieties that differ sharply in their service characteristics and therefore turn into completely different goods. Such a phenomenon can now be observed, in particular, in the Russian computer market, where a limited number of types of computers are offered under different conditions and at very different prices.

The third major group of product differentiation factors is related to advertising.

Secondly, it contributes to the formation of new needs. An example is the promotion of disposable baby diapers to the Russian market. It was advertising that revealed their convenience for parents and benefits for the child, instantly creating a significant market.

Third, advertising creates product differentiation where there is no real difference between them. As already noted, in the cigarette market, many qualitative differences are imaginary. Behind the imaginary differences in quality, very often very real differences in the advertising presentation of the goods are hidden.

Product differentiation provides firms with certain monopolistic advantages. But the situation has another interesting side. We said earlier that access to an industry in which conditions of monopolistic competition have developed is relatively free. Now let's clarify this formulation: entry into such a market is not blocked by any other barriers, with the exception of barriers associated with product differentiation.

In other words, product differentiation not only creates advantages for the company, but also helps protect them from competitors: it is not so easy to accurately replicate the delicate taste of the famous liquor or even find an equivalent response to a successful advertising campaign. Therefore, firms deliberately create and maintain differentiation, thereby achieving additional profits for themselves and along the way (regardless of their will - remember the principle of the "invisible hand") providing a variety of goods on the country's market.

¨ The role of non-price competition

In no other market structure does non-price competition play such an important role as in monopolistic competition.

Of the two main types of competition - price and non-price - our enterprises, on extremely unfavorable terms for themselves, were involved in the most severe of them, namely price competition. Firms that conduct price competition try to attract consumers by setting prices lower than those of their rivals. Accordingly, profits are reduced, and if the price falls below costs, then losses appear. At the same time, domestic enterprises (especially when trying to enter foreign markets) often have to compensate for the lag in product quality due to low prices.

On the contrary, with non-price competition, firms seek to attract buyers not by lowering prices, but by increasing the consumer value of the product. This can be achieved in many ways: by improving the quality of a product, by better adapting it to the needs of a particular group of consumers, by creating a fundamentally new type of product, by improving service, by intensifying advertising, etc. At the same time, product differentiation is the basis for non-price competition.

Until the post-war period, of the two types of competition all over the world, the price one noticeably prevailed. At present, however, the situation has changed, and non-price competition has come to the fore. This is due to a number of advantages that this type of competition provides to the firms conducting it.

First, price fights have proved unprofitable for all participants in the struggle, and they are especially destructive for small and medium-sized firms. (Namely, in comparison with Western giants, Russian enterprises are for the most part.) The fact is that the larger the company, the more significant financial resources it has and the longer it can sell goods at reduced prices. Under these conditions, the price war hits the most vulnerable places of the domestic industry weakened by the crisis.

Secondly, in the conditions of a modern highly developed economy, the demands of consumers have become more complicated. The market began to favorably accept numerous and varied variations of goods, it became possible to attract consumers with increased quality, special properties of a product or service, etc. The special properties of a product are often more important than price attractiveness. That is, successful product differentiation is often a way of avoiding any competition in general, leaving for a completely free market niche.

Thirdly, the cost of non-price competition, if done correctly, is cheaper for the firm than the cost of price competition. Indeed, a decrease in prices below the optimal level always leads to a decrease in profits, and the decrease is all the stronger, the greater the reduction in prices. The relationship between measures of non-price competition and profit is much more complicated. A good commercial can cost as much as a bad one. The advantage of the first over the second may well be achieved not due to expensive shooting techniques, but due to interesting idea film, its greater intelligibility, etc. The same goes for product improvements: a small and therefore inexpensive design change, if well conceived, can make a product much more user-friendly. As a result, the growth of competitiveness will be achieved without high costs.

From what has been said, of course, it does not follow that non-price competition is feasible without any costs at all - good advertising or high quality products also cost a lot of money. But the field of activity of the company, no doubt, is wider than with price competition. There is always hope to beat the competitor with the best ideas. For example, using the advantages of the Russian engineering school and the huge scientific potential of the country.

Finally, fourthly, price competition in our time in most countries, including Russia, is limited by law. Price reduction should not reach the level of dumping, i.e. the price cannot fall below the cost price.

¨ The main features of the oligopolistic market

Oligopoly is one of the most common market structures in the modern economy. In most countries, almost all branches of heavy industry (metallurgy, chemistry, automotive, electronics, ship and aircraft building, etc.) have just such a structure.

An oligopoly is a market structure in which there are a small number of selling firms in the market for a product, each of which has a significant market share and considerable price control. However, one should not think that companies can literally be counted on the fingers. In an oligopolistic industry, as in monopolistic competition, there are often many small firms along with large ones. However, a few leading companies account for such a large part of the industry's total turnover that it is their activities that determine the course of events.

Formally, oligopolistic industries usually include those industries where several largest firms (in different countries, from 3 to 8 firms are taken as a reference point) produce more than half of all output. If the concentration of production is lower, then the industry is considered operating in conditions of monopolistic competition.

The main reason for the formation of an oligopoly is economies of scale. An industry acquires an oligopolistic structure if the large size of the firm provides significant cost savings and, therefore, if large firms in it have significant advantages over small ones.

It is customary to say that oligopolistic industries are dominated by the Big Two, Big Three, Big Four, etc. More than half of sales come from 2 to 10 firms. For example, in the United States, four companies account for 92% of the production of all cars. Oligopoly is characteristic of many industries in Russia. Thus, passenger cars are produced by five enterprises (VAZ, AZLK, GAZ, UAZ, Izhmash). Dynamic steel is produced by three enterprises, 82% of tires for agricultural machines - by four, 92% of soda ash - by three, the entire production of magnetic tape is concentrated in two enterprises, motor graders - in three.

In sharp contrast to them are light and food industry. In these industries, the largest 8 firms account for no more than 10%. The state of the market in this area can be confidently characterized as monopolistic competition, especially since product differentiation in both industries is exceptionally large (for example, the variety of varieties of sweets that are produced not even by the entire food industry, but only by one of its sub-sectors - the confectionery industry).

But it is not always possible to judge the structure of the market on the basis of indicators relating to the entire national economy. So, often certain firms that own an insignificant share of the national market are oligopolistic in the local market (for example, shops, restaurants, entertainment enterprises). If the consumer lives in a big city, he is unlikely to go to the other end of the city to buy bread or milk. Two bakeries located in the area of ​​his residence may be oligopolists.

Of course, the establishment of a quantitative boundary between oligopoly and monopolistic competition is largely arbitrary. After all, the two named types of market have other differences from each other.

Products in the oligopolistic market can be either homogeneous, standardized (copper, zinc, steel) or differentiated (cars, household appliances). The degree of differentiation affects the nature of competition. For example, in Germany, car factories usually compete with each other in certain classes of cars (the number of competitors reaches nine). Russian car factories practically do not compete with each other, since most of them are specialized in a narrow field and turn into monopolists.

An important condition affecting the nature of individual markets is the height of the barriers that protect the industry (the amount of initial capital, the control of existing firms over new technology and latest products with the help of patents and technical secrets, etc.).

The fact is that there can never be many large firms in an industry. Already the multibillion-dollar value of their plants serves as a reliable barrier to the entry of new companies into the industry. In the usual course of events, a firm becomes larger gradually, and by the time an oligopoly is formed in the industry, a narrow circle of largest firms has actually been determined. In order to invade it, one must immediately have such an amount that the oligopolists have gradually invested in the business over decades. Therefore, history knows only a very small number of cases when a giant company was created “from scratch” through one-time huge investments (Volkswagen in Germany can be considered an example, but in this case the state acted as an investor, i.e. non-economic factors).

But even if funds were found for the construction of a large number of giants, they would not be able to work profitably in the future. After all, the market capacity is limited. Consumer demand is enough to absorb the products of thousands of small bakeries or auto repair shops. However, no one needs metal in quantities that could smelt thousands of giant domains.

There are significant limitations in the availability of economic information in this market structure. Each market participant carefully guards trade secrets from its competitors.

A large share in output, in turn, provides oligopolistic firms with a significant degree of control over the market. Already each of the firms individually is large enough to influence the position in the industry. So, if the oligopolist decides to reduce output, this will lead to an increase in prices in the market. In the summer of 1998, AvtoVAZ took advantage of this circumstance: it switched to working in one shift, which led to the dispersal of unsold car stocks and allowed the plant to raise prices. And if several oligopolists begin to pursue a common policy, then their joint market power will come close to that possessed by a monopoly.

A characteristic feature of the oligopolistic structure is that firms, when forming their pricing policy, must take into account the reaction of competitors, that is, all producers operating in the oligopolistic market are interdependent. With a monopolistic structure, such a situation does not arise (there are no competitors), with perfect and monopolistic competition - also (on the contrary, there are too many competitors, and it is impossible to take into account their actions). Meanwhile, the reaction of competing firms can be different, and it is difficult to predict it. Let's say that a firm in the domestic refrigerator market decides to cut the price of its products by 15%. Competitors may react to this in different ways. First, they can cut prices by less than 15%. In this case, this company will increase the sales market. Secondly, competitors can also reduce prices by 15%. The volume of sales will increase for all firms, but due to lower prices, profits may decrease. Thirdly, a competitor may declare a "price war", that is, reduce prices even more. The question then becomes whether to accept his challenge. Usually in a "price war" among themselves large companies do not enter, as its outcome is difficult to predict.

Oligopolistic interdependence - the need to take into account the reaction of competing firms to the actions of a large firm in an oligopolistic market.

Any model of an oligopoly must proceed from taking into account the actions of competitors. This is an additional significant limitation, which must be taken into account when choosing a behavior pattern for an oligopolistic firm. Therefore, there is no standard model for determining the optimal volume of production and the price of products for an oligopoly. It can be said that determining the pricing policy of an oligopolist is not only a science, but also an art. Here, the subjective qualities of a manager play an important role, such as intuition, the ability to make non-standard decisions, take risks, courage, determination, etc.

¨ Varieties of oligopoly

The oligopolistic structure can be very different, each of its varieties leaves its mark on the development of the company's pricing policy. The number and size of firms in the industry, the nature of products, the degree of technology renewal, etc. play a role. Consider some of the options for the market behavior of oligopolistic firms.

Uncoordinated oligopoly, in which firms do not enter into any contacts with each other and do not consciously try to find a point of equilibrium that suits everyone.

Cartel (or collusion) of firms, which does not eliminate their production and marketing independence, but provides for an agreement between them on a number of issues. First of all, cartel agreements include uniform, monopolistically high prices at which cartel members undertake to sell their goods on the market.

The cartel agreement also provides for the division of the sales market. This means that each member of the cartel undertakes to sell their goods, for example, only in certain territories.

In addition, in order to be able to keep high prices, the supply of goods on the market is often limited, and this requires limiting the size of production. Therefore, cartel agreements often provide for the determination of the share in the production of various goods for each member of the cartel.

Collusion can be both secret and legal. In many European countries cartels are allowed, in Russia and the USA they are prohibited by law. There are many international cartels, the most famous of which is OPEC (Organization of the Petroleum Exporting Countries).

Let's assume that the firms - members of the cartel - decided to set a single price for their products. To do this, it is necessary to construct a marginal cost curve for the cartel as a whole. Then it is possible to determine the optimal volume of production in the cartel, which allows maximizing the total profit. In other words, the cartel acts as a monopolist. But the most difficult problem is the distribution of sales between the parties to the cartel agreement. In an effort to maximize profits, the cartel must set quotas in such a way that the total costs are minimal. But in practice, it is rather difficult to implement such an establishment of quotas. The task is solved by conducting complex negotiations, during which each company seeks to "bargain" for itself the best conditions, to outwit partners. Often, firms with higher costs manage to get large quotas, which does not solve the problem of profit maximization. In fact, markets are usually divided geographically or according to the prevailing volume of sales.

The creation of cartels runs into serious obstacles. It's not just antitrust laws. Agreements are often difficult to reach due to the large number of firms, significant differences in the range of products, the level of costs. Usually, a cartel member is tempted to break the agreement and make a big profit. Due to the legal prohibition, cartels do not officially exist in modern Russia. However, the practice of one-time price collusion is very widespread. It suffices to recall how periodically there is a shortage of either butter or sunflower oil, or gasoline on the consumer market. And how then these goods reappear with greatly increased prices at all sellers at the same time.

Often, they also try to carry out functions close to cartel for more permanent basis various associations: tea importers, juice producers, etc. In October 1998, for example, the State Antimonopoly Committee of the Russian Federation launched an investigation into the increase in gasoline prices by members of the Moscow Fuel Association, which unites about 60 gas station owners and controls 85-90% of gasoline sold in Moscow.

However, the future is even more fearful in this sense. The high concentration of production, the inability to win over customers by market methods, the close contacts established in the pre-reform era by all enterprises in the main industries, and a number of other factors favor the mass emergence of cartels. If the development of events really goes according to this scenario, the economy could be seriously damaged. Its prevention is therefore an important task of state economic policy.

Cartel-like market structure(or "playing by the rules"), in which firms deliberately make their behavior understandable and predictable for competitors, which makes it easier for the industry to achieve equilibrium or a state close to it.

Firms do not enter into agreements with each other, but subject their behavior to certain unwritten rules. Such a policy, on the one hand, makes it possible to avoid legal liability arising from anti-cartel legislation. And on the other hand, to reduce the risk of unpredictable reactions of competitors, i.е. protect yourself from the main danger inherent in an uncoordinated oligopoly. "Playing by the rules" facilitates the achievement of oligopolistic equilibrium.

The most commonly used technique of "playing by the rules" is price leadership. It consists in the fact that all large price changes are first carried out by one firm (usually the largest), and then they are repeated in similar sizes by other companies. The price leader actually single-handedly determines prices (and hence the volume of production) for the entire industry. But he does it in such a way that the new prices suit the rest. After all, if they are unprofitable for competitors, then they simply will not follow the leader and the industry will move into a state of uncoordinated oligopoly that is dangerous for all participants. Not coincidentally, therefore, the leader often "probes" the attitude of competitors, publicizing in advance the size of the upcoming change and listening to the reaction of other firms.

Price leadership is very common in the West, and today it can be seen in Russia, for example, in the automotive industry. The Russian automotive industry is a classic example of an oligopoly. In general, there are few independent car manufacturers in the country (about a dozen), and there are even fewer large firms that have a significant impact on the market. So, in the production of passenger cars there are only three of them - AvtoVAZ, GAZ and AZLK.

In 1991-1992 the leader in prices for passenger cars has always been the largest manufacturer - AvtoVAZ. And AZLK and GAZ followed him. It was a time of hyperinflation, when everything went up in price. The speed of price increases was decisive. And AvtoVAZ set a very fast pace. There were economic opportunities for this. With the beginning of social stratification, almost the first purchase of rich people was just a car. In addition, many cars were bought by new private firms, where mobility is the main key to success.

AvtoVAZ's leadership in prices actually came down to their fastest increase, which was quite suitable for other manufacturers as well. At the turn of 1993, however, AZLK and GAZ refused to repeat the next doubling of prices after the leader. The fact is that the Zhiguli at that time were competitive abroad and AvtoVAZ could focus on higher prices abroad. By inflating prices within the country and, accordingly, losing part of Russian consumers, he did not lose anything - the released cars were exported and brought even big profits to the plant. On the contrary, the sale of "Moskvich" and "Volga" abroad was small. Their producers had to take into account the purchasing power of Russians to a greater extent. And they stopped raising prices.

VAZ-2109 has become noticeably more expensive than the Volga and almost three times more expensive than the Moskvich. As a result, AvtoVAZ had its first sales problems. The lesson was not in vain: in the same 1993, the growth rate of prices for Zhiguli dropped sharply.

The main factor in subsequent years was the gradual loss of international competitiveness of Russian cars. First, the Zhiguli were forced to leave foreign markets. Then, despite the protective customs duties, foreign cars began to push them in Russia.

A new turn in the situation was caused by the devaluation of the ruble. It made foreign cars prohibitively expensive and paved the way for higher prices for domestic cars. Frightened by recent sales difficulties, AvtoVAZ this time refused to play the role of a leader in their increase. It was taken over by AZLK, which by that time had managed to significantly improve the quality of the cars it produced. Thus, the system of leadership in prices was restored in the industry again.

¨ The main features of a monopoly

Monopoly is the most striking manifestation of imperfect competition. Strictly speaking, in conditions of monopolization of the market, the very existence of competition can be recognized only with great reservations. After all, competition presupposes the division of economic power, the choice of the consumer. That is why the competition between manufacturers for the demand of the consumer begins, there is a desire to satisfy his needs in the best possible way. In conditions of monopoly, consumers are opposed by a single giant producer. Whether the consumer wants it or not, he forced use the monopolist's products, agree to its price terms, etc.

The omnipotence of the monopolist is helped by the uniqueness (indispensability) of the latter's products. Can a resident of Moscow or Vladivostok voluntarily refuse the services of a monopoly supplier of electricity, replacing it with something in the household? Are the coal enterprises of Kuzbass able to transport their products without the help of the railway? The negative answer to such questions is obvious, as well as the fact that such a provision allows the monopolist to dictate its terms from a position of strength.

Strengthens the power of the monopolist over the market and the completeness of the information available to him. Serving all consumers of the industry, he knows exactly the size of the market, he can quickly and with absolute accuracy track changes in sales volumes and, of course, he is aware of the prices in detail, which he himself sets.

It is clear that the combination of all these circumstances creates an exceptionally favorable environment for the monopolist and favorable prerequisites for making super profits. It is obvious, however, that these advantages would instantly disappear if at least one more competitor manufacturer appeared in the industry. The monopolist would immediately have to move from diktat in relation to the consumer to scrupulous consideration of the needs and interests of the latter.

The current generation of Russians, who have experienced the collapse of state monopoly, will easily find a lot of everyday examples of such changes. Stale bread, for example, which until recently reigned supreme in bakeries, instantly became a rarity after the monopoly supply system was replaced by competition from a mass of independent bakeries.

That is why the monopolistic structure of the market, where it exists, is protected by a whole system of practically irresistible barriers to entry into the industry by independent competitors. The main barriers that exist in the monopolistic industry are:

1. the advantages of large-scale production (up to a natural monopoly);

2. legal barriers (monopoly ownership of sources of raw materials, land, rights to scientific and technological achievements, exclusive rights sanctioned by the state);

3. unfair competition.

Let's take a closer look at these types of barriers.

As in an oligopolistic market, in a monopolized industry only large enterprises . Monopoly chances exist only where size creates large cost advantages. This position of the theory has been repeatedly verified by practical experience.

The fact is that the high profits of monopolists have always been the envy of small companies. In the history of many countries, attempts by small firms under one name or another to create a cartel (association, amalgamation, commission on standards, etc., since cartels are officially prohibited in most countries) and to dictate their terms to suppliers and consumers by joint efforts are recorded.

In modern Russia, for example, such steps were taken by tea importers and juice producers. The outcome of these attempts, however, has always been disappointing for their organizers. Since the costs of this organization were not lower than those of small producers, nothing prevented new, independent firms from entering the industry and successfully competing with the cartel, and dissatisfied members of the association itself (these were bound to appear) to leave it calmly and with impunity.

Another thing is industries where large enterprises have lower costs than competitors. This creates a high barrier to anyone wishing to enter the industry. , and under favorable circumstances for leading firms, it allows them to completely monopolize the market. An example of such a company is the Russian enterprise "Center im. Khrunichev" - manufacturer of heavy space rockets "Proton".

In addition to economic barriers, a monopoly is usually protected by legal barriers (legal) and they often play a decisive role.

The most common source of legal barriers are property rights. If, for example, unique sources of raw materials, lands with special properties, etc., are owned by a certain firm, this automatically creates the preconditions for a monopoly. It is only important that the product produced using these natural resources is itself unique and irreplaceable.

Intellectual property rights also enjoy legal protection. Thus, a properly executed and registered invention (a document confirming this is called a patent) gives its owner a monopoly right to manufacture the corresponding product for a certain period of time. The owner of a patent may solely exercise his monopoly right, or may grant it to other persons (grant a license) in full or in part for a fee. For example, he can sell a license to manufacture and market a patented product in a certain country on the terms of paying a certain percentage of the price of each unit sold.

On the contrary, the absence of a patent deprives the inventor of any privileges. This is how the legal nature of this barrier is manifested: if there is a patent, there is a right; if there is no patent, there are no rights. For our country, this circumstance is of great importance, because almost all inventions of the Soviet era are not protected by international patents and until now are used by foreigners free of charge.

With manifestations unfair competition the state is fighting in the toughest way. The fact is that a large manufacturer in the fight against smaller competitors has a lot of advantages, which actually come down to the use of brute force. By such methods, you can force the bank to suspend lending to competitors, railways- transportation of their goods (this is what John D. Rockefeller once did), etc. There is an opportunity to oust a competitor and establish a monopoly even where it would never have developed in an honest way.

An important type of unfair competition is dumping - the deliberate sale of products below cost in order to oust a competitor. A large firm - a potential monopolist - has large financial reserves. Therefore, it is able to trade for a long time at a loss at low prices, forcing a competitor to do the same. When the latter fails and goes bankrupt, the monopolist will again raise prices and compensate for its losses.

In Russia, the problem of economic monopolization is very acute. The main feature of the monopolization of the Russian market is that it has developed as the "heir" of the state monopoly of the socialist economy.

The socialist economy was a single national economic complex in which each enterprise was not completely autonomous, but was integral part nationwide superstructure. At the same time, the satisfaction of the needs of the whole country in one form or another of the product was often entrusted to only one or two factories. So, at the end of the 80s, more than 1,100 enterprises were complete monopolists in the production of their products. Even more often there was a situation when the number of manufacturers throughout the giant country did not exceed 2-3 plants. Total of 327 commodity groups, produced by the country's industry, 290 (89%) were subject to strong monopolization.

Thus, if in countries with a market economy, monopolization usually took place through the organizational association of initially independent companies, then socialist monopoly was based on the deliberate creation of only one producer (or a very narrow group of producers).

The beginning of market reforms in our country led to a sharp increase in monopoly tendencies. This was partly due to the collapse of the USSR and the weakening of economic ties between the former Soviet republics. New monopolists were added to the former monopolists, namely, enterprises that were not the only producers within the entire Union, but became such in a reduced territory.

However, much greater value there was a change in business conditions. Thanks to them, the consequences of monopolization and its impact on the economy have sharply increased. The point is that the transformation Russian factories into private enterprises has created a powerful incentive for obtaining monopoly profits. And the freedom to set prices and choose the volumes of production gave firms the means to achieve this goal. All three of the most important consequences of monopolization (underestimation of production, overpricing, obtaining monopoly super-profits), which until then had been restrained by the socialist state, broke out. At the same time, the old vice of Soviet monopoly producers - inefficiency - was preserved wherever the monopoly remained. Strengthening manifestations of monopoly, in turn, had a negative impact on the overall course of reforms in the country.

Using their monopoly power, the monopolists sharply limited supply. The deliberate reduction in output, combined with the increase in prices by Russian monopoly enterprises, was the most important microeconomic reason for the particular depth of the crisis in Russia.

¨ Natural monopolies

In some industries, the rule applies without any restrictions: the larger the scale of production, the lower the costs. This creates the prerequisites for the strengthening of a single manufacturer in such an industry. This state of the market is a monopoly - a situation fraught with a number of major problems for the economy. In this case, however, monopoly arises from natural causes: the technological features of production are such that a single manufacturer serves the market more efficiently than several competing firms are able to do. Economists call such a monopoly natural or technological. Its classic example is various types of infrastructure.

Indeed, it is not economically feasible to build two alternative airports or lay two competing railways next to each other.

It makes no sense to break up natural monopolies. For example, even if the railway network, which is monopoly operated by one company, is divided into several regional sections and transferred to the ownership of independent companies, the natural source of monopoly will still not be eliminated. From city A to city B, it will still be possible to pass only one road. As a result, the single market of transportation services will be divided into a number of local ones. Instead of one monopoly, several will arise (each in its own area). The level of competition will not increase. Moreover, due to the difficulty of harmonizing the work of regional companies, the overall costs of the railway industry may increase.

The macroeconomic aspect of the problem is also important. Infrastructure networks, which are natural monopolies, ensure the interconnection of economic entities and the integrity of the national economic system. They don't speak for nothing. that in modern Russia the economic unity of the country is not least determined by unified railways, common electricity and gas supply.

Thus, the destruction of natural monopolies is unacceptable, but this does not mean that the state should not interfere in their activities, on the contrary, it should regulate the activities of natural monopolies in order to avoid abuses on their part.

¨ Principles of antimonopoly policy

A monopoly is associated with a whole bunch of sharply negative consequences for the country's economy: underproduction, inflated prices, inefficient production. The client of a monopoly company is forced to put up with high prices, to agree with the poor quality of products, their obsolescence (slowdown in technical progress), lack of service and other manifestations of disregard for the interests of the consumer. Even more dangerous is that the monopoly completely blocks the mechanisms of self-regulation of the market.

The omnipotence of the monopolist, due to the insurmountable barriers on the way to the industry, is not threatened by anything even in the long term. The market alone cannot solve this problem. Under these conditions, only a state pursuing a conscious antimonopoly policy can improve the situation. It is no coincidence that in our time there is not a single developed country (and Russia in this sense is no exception) where there would be no special antimonopoly legislation and there would be no special authority to oversee its implementation.

At the same time, the implementation of antimonopoly policy is associated with a number of objective difficulties. As already noted, for industries in which the establishment of a monopolistic structure is possible, a large optimal size of the enterprise is characteristic, i.e. the minimum average long-run costs are achieved at very high volumes of production. Small-scale production in potentially monopolistic industries is extremely inefficient. By assembling cars at tiny enterprises, it is impossible to achieve the same low costs as on the AvtoVAZ assembly line.

And this is far from a special case. You can talk about impossibility, the transformation of a monopolized industry into an industry of perfect competition how about general rule. Transformations of this kind are hindered by positive economies of scale. Even if the state insists on its own and despite the growth of costs will forcibly plant small-scale production, artificially formed dwarf enterprises will turn out to be uncompetitive internationally. Sooner or later they will be crushed by foreign giants.

For these reasons, direct splitting of monopoly firms in developed market economies is quite rare. The usual goal of antitrust policy is not so much to fight monopolists as such, but to limit monopolistic abuses.

The issue is particularly acute with respect to natural monopolies. Their high economic efficiency makes their crushing absolutely unacceptable. As monopolists, these structures are trying to solve their problems primarily by raising tariffs and prices. The consequences of this for the country's economy are the most devastating. Production costs in other industries are rising, non-payments are growing, and interregional ties are paralyzed.

At the same time, the natural nature of the monopoly position, although it creates opportunities for effective work does not guarantee that these possibilities will be implemented in practice. Indeed, in theory, RAO UES of Russia could have lower costs than several competing electric power firms. But where is the guarantee that it wants to keep them at a minimum level, and, say, will not increase the costs of the top management of the company.

The main way to combat the negative aspects of natural monopolies is through state control over the pricing of natural monopoly goods and the volume of their production (say, by determining the circle of consumers subject to mandatory service).

In addition to price regulation, reforming the structure of natural monopolies can also bring certain benefits - especially in our country. The fact is that in Russia, within the framework of a single corporation, both the production of natural monopoly goods and the production of goods that are more efficient to produce under competitive conditions are often combined. This association is, as a rule, the nature of vertical integration. As a result, a giant monopoly is formed, representing a whole sphere of the national economy.

RAO "Gazprom", RAO "UES of Russia", the Ministry of Railways are the clearest examples of such associations. RAO Gazprom, along with the Unified Gas Supply System of Russia (i.e., a natural monopoly element), includes exploration, production, instrument-making enterprises, design and technological structures, facilities social sphere(i.e. potentially competitive elements). The Ministry of Railways is in charge of both infrastructure (railways, stations, Information system), and non-monopoly activities (contracting construction and repair organizations, catering enterprises). RAO "UES of Russia" unites both power grids and power plants. Therefore, it is possible to develop competition in those activities of natural monopolies where it can be achieved.

Unlike a natural monopoly, an artificial (or entrepreneurial) monopoly develops in those industries where a single producer does not have increased efficiency compared to several competing firms. The establishment of a monopolistic type of market is therefore not inevitable for such an industry, although in practice it may develop if the future monopolist succeeds in eliminating competitors.

The use of the term "artificial monopoly" in the economic and legal literature has the following feature: this concept is combined both by the dominance of a single monopolist, which is quite rare on the market, and by the more common situation of the predominance of several to some extent cooperating firms on it, i.e. speech at once we are talking about pure monopoly and about two varieties of oligopoly - the cartel and the cartel-like structure of the market. Such an extended interpretation of the term "monopoly" is justified by the fact that in all the above cases, the firms that dominate the market are to one degree or another able to act as a whole, that is, they show signs of monopolistic domination in the market.

In the case of artificial monopoly, the main direction of antimonopoly policy is to counteract the formation of such monopolies, and sometimes even the destruction of existing ones. To do this, the state uses a wide range of sanctions: these are preventive measures (for example, a ban on the merger of large firms), and various, and often very large, fines for inappropriate behavior in the market (for example, for attempting to collude with competitors), and direct demonopolization, t i.e. the forced fragmentation of the monopolist into several independent firms.

The first in the history of Russia legislative act, regulating the procedure for the competitive behavior of firms in a market economy and containing the "rules" of the game "for competitors, was adopted in March 1991. This is the law of the Russian Federation "On competition and restriction of monopolistic activity in commodity markets." In 1995, the text of the Law was changes and additions have been made.

The main body implementing antimonopoly policy in Russia is the Ministry for Antimonopoly Policy and Entrepreneurship Support. Its rights and opportunities are quite wide, and the status corresponds to the position of similar bodies in other countries with a market economy.

In accordance with the new interpretation of the Law, an enterprise that controls 65% or more of the commodity market can be considered an unconditional monopolist. An enterprise that controls 35-65% of the market can also be recognized as a monopolist, but for this, the antimonopoly authorities must prove that there is a "dominant position" of the economic entity in the market by examining the specific market situation.

“Dominant position” gives the firm the ability to exert a decisive influence on competition, obstruct market access to other economic entities or otherwise restrict their freedom to economic activity. A list of shares has been established that are treated as abuse of dominant position. These include the withdrawal of goods from circulation in order to create a shortage, the imposition of conditions that are unfavorable to the counterparty or not related to the subject of the contract, the creation of obstacles to competitors' access to the market, and the violation of the established pricing procedure. Collusions on the prices of goods and services, on prices at auctions and tenders, on the division of the market, on the restriction of access to the market are recognized as agreements of economic entities that restrict competition.

The law establishes state control over the creation, merger, accession, transformation, liquidation of economic entities, as well as over compliance with antimonopoly laws when acquiring shares, shares, stakes in authorized capital enterprises, forced separation of business entities. The responsibility of the enterprises and officials for violating antitrust laws.

What policy is the state pursuing in relation to natural monopolies? In this case, a contradiction arises. On the one hand, firms - natural monopolists, like any monopolists, set high monopoly prices, reducing the volume of production, and receive excess profits. On the other hand, as mentioned above, competition in industries with a natural monopoly is not economically efficient. Therefore, the state, preserving natural monopolies, takes measures to limit their negative consequences for society, primarily by controlling prices for their products.

Considerable attention is paid to the fight against competition-restricting practices of local authorities. In the conditions of an unstable economic situation in the country, regional authorities often try to support their enterprises using illegal methods. For example, under one pretext or another, to prohibit the import of competing goods from other regions. This creates a monopoly position for local producers, which naturally provokes protests from the Ministry of Antimonopoly Policy. However, as in other areas of modern Russian economics and politics, the central authorities, despite the legal validity of their demands, are far from always able to overcome the resistance of local authorities.

In general, the system of antimonopoly regulation in Russia is still in its infancy and requires radical improvement.

Today we can state with satisfaction that the traditionally existing gap between Russia and the developed capitalist countries in the field of theory and practice of competition, at least, has ceased to deepen. A real transition to market relations objectively required a more serious attitude to this.

The positive features of competition are obvious. In the presence of competition in the market, manufacturers are constantly striving to reduce their production costs in order to increase profits. As a result, productivity is increased, costs are reduced, and the company is able to reduce prices. Competition also encourages manufacturers to improve the quality of goods and constantly increase the variety of goods and services offered. That. manufacturers are forced to constantly fight competitors for buyers in the sales market by expanding and improving the range of high-quality goods and services offered at lower prices. The consumer benefits from this.

However, as practice has shown, the majority of Russian enterprises are not ready for active competition. In the conditions of price liberalization and a jump in inflation, the industry found itself in a difficult position.

For many decades of the Soviet period, the economy of our country was closed, there was no competition either between domestic producers (almost all sectors of the national economy were highly monopolized, enterprises did not have the right to make independent economic decisions), or with foreign ones. This led to low production efficiency, an excessively high level of costs, and a deep technological lag behind advanced scientific and technical developments in many sectors of the Soviet economy.

Therefore, the wave of imports that flooded the Russian market after the collapse of the USSR, instead of a positive effect, had an extremely negative impact. Most imported goods are produced using modern technologies at a lower cost than Russian goods, as a result of which they are cheaper and often of better quality than their domestic counterparts. In addition, in the conditions of a planned economy, our factories did not have traditions of competitive struggle, such important components of it as non-price competition and advertising were not developed. Thus, Russian manufacturers turned out to be simply unprepared to compete with foreign ones, and many of them went bankrupt in the first years of reform, which plunged the country into a deep crisis.

It is possible that such consequences would not have occurred if the state had acted more carefully in relation to the regulation of import volumes, gradually increasing the level of competition in the country's domestic market, enabling domestic producers to adapt to the new conditions.

The problem of the competitiveness of Russian goods remains acute to this day, therefore, a well-thought-out, competent state policy is needed to control the import of goods and promote domestic producers.

And yet, a way out of a difficult financial situation can only be on the way to creating a competitive production focused on the needs of consumers. And in this sense, competition is not a destabilizing factor, but a condition for the survival of domestic production.

It is impossible to deny the positive aspects that competition has brought to our economy. The theory of perfect competition is not as far from Russian reality as one might think. This is facilitated by the development of small business in our country, which, despite all the difficulties, is rapidly gaining momentum.

The fact is that the majority of Russian businessmen started their business literally from scratch: no one had large capitals in the USSR. Therefore, small business has embraced even those areas that in other countries are controlled by big capital. Nowhere else in the world do small firms play such a prominent role in export-import transactions. In our country, many categories of consumer goods are imported mainly by millions of shuttles, i.e. not even just small, but the smallest enterprises. In the same way, only in Russia, the smallest firms-teams are actively engaged in construction for private individuals and the repair of apartments. Small-scale wholesale trade is also a specifically Russian phenomenon.

Shuttles, photo studios, hairdressing salons; vendors offering the same brands of cigarettes or chewing gum at subway stations and auto repair shops; typists and translators; apartment renovation specialists and retailers vegetable markets peasants - all of them are united by the approximate similarity of the product offered, the insignificant scale of business in comparison with the size of the market, the large number of sellers, that is, many of the conditions for perfect competition. Mandatory for them and the need to accept the prevailing market price. The criterion of perfect competition in the sphere of small business in Russia is fulfilled quite often.

Thus, conditions close to perfect competition exist in many sectors of the economy where new private business predominates.

A completely different picture is observed in industries dominated by privatized enterprises. These sectors of the economy are usually highly monopolized.

The high level of monopolization and its sharply negative impact on the economy makes it necessary to conduct an antimonopoly policy in our country. Moreover, Russia needs to be demonopolized; a radical reduction in the number of sectors of the economy where a monopoly has been established.

The main problem and at the same time the difficulty is the specificity of the monopolism inherited from the socialist era: Russian monopolists for the most part cannot be demonopolized by disaggregation.

In the West, the demonopolization of giant enterprises is possible by dividing them into parts. These monopolists were formed by merging and acquiring independent firms. The latter, at least theoretically (in practice, this is rarely done, and there is no need for this, since one hundred percent monopolists are almost never found), can be restored as independent companies. Russian monopolists, on the contrary, were immediately built as a single plant or technological complex, which in principle cannot be divided into separate parts without complete destruction.

Another way of demonopolization - foreign competition - was probably the most effective and effective blow to domestic monopoly. When next to a monopolist's product on the market there is an imported analogue superior in quality and comparable in price, all monopolistic abuses become impossible. The monopolist has to think about how not to be ousted from the market at all.

But the problem is that due to ill-conceived foreign exchange and customs policies, import competition in many cases turned out to be excessively strong. Instead of limiting abuses, it has effectively destroyed entire industries.

Obviously, the use of such a potent method must be very careful. Imported goods, no doubt, should be present on the Russian market, being a real threat to our monopolists, but should not become a reason for the mass liquidation of domestic enterprises.

Another way - the creation of new enterprises that compete with monopolists - is preferable in all respects. It eliminates the monopoly without destroying the monopolist himself as an enterprise. In addition, new enterprises always mean production growth and new jobs.

The problem is that in today's conditions it is difficult to implement. Due to the economic crisis, there are few domestic and foreign companies in Russia willing to invest in the creation of new enterprises. Nevertheless, certain shifts in this regard, even in crisis conditions, can be provided by state support for the most promising investment projects.

Natural monopolies present a particular problem. Every now and then in the Russian press there are reports of rolling blackouts, non-payments, conflicts between monopolists and consumers. Perhaps there is no other country where natural monopolies would play such an important role as in Russia, because there is no country comparable to Russia in terms of area and population living in difficult climatic conditions. The high efficiency of natural monopolies makes it impossible to break them up. The main way to combat the negative aspects of natural monopolies is through state control over the pricing of natural monopoly goods and the volume of their production.

Since the beginning of the 1990s, these problems have become acute for Russia: without taking firm and consistent measures against monopoly, one cannot hope for the success of economic reform and the transition to a market economy. The success of economic reforms to a large extent depends on a balanced, well-considered system of state regulation of monopoly processes and competitive relations.

At this stage, the problem of monopolization and unfair competition ceases to be purely economic - it becomes more and more political and social. Undoubtedly, in some cases the existence of a monopoly is justified and necessary, but these processes must be strictly controlled by the state to prevent abuse of its monopoly position.

A decisive role in creating a favorable competitive environment in the market is played by antimonopoly legislation and the activities of antimonopoly authorities, the correct behavior of which contributes to the stabilization of the entire economy as a whole.

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Of course, you can get rid of fixed costs if you liquidate the company. But this is not a short-term problem, but long term, because in the short term, production capacities do not change, including they are not liquidated.

In any market economy there is competition. It may be perfect or imperfect. What are their features?

Facts about perfect competition

Under perfect competition modern economists understand the state of the market in which:

• in most business segments there are many independent manufacturers, suppliers of goods and services;
• none of the enterprises can set prices that are convenient for themselves - or influence their establishment, since they are regulated by demand from buyers, as well as by the general level of supply from the market;
• price dumping of players on a market scale or at least a segment is practically not observed, since prices below those determined by the market make the business unprofitable.

There are a number of conditions for the formation of a market with perfect competition. This is:

• the absence of significant barriers (bureaucratic, financial) for new entrepreneurs to enter the market;
• lack of legislative regulation of prices;
• sufficiently high purchasing power of the population.

In its pure form, perfect competition, if we talk about the scale of national economies, practically does not occur. In the economic system of almost any country there are industries in which there are, one way or another, barriers to new players or legislative regulation of prices. Even in the most developed countries there are regions with a low purchasing power of the population - which makes it difficult to open new profitable industries in them.

But almost always one can find in the national economy industries in which competition is formed that is close to perfect. Take, for example, the IT industry. It is quite possible to develop a successful business in it with minimal barriers and financial costs, in order to then start selling IT solutions at prices dictated by the market. Regarding the solvency of customers - in most cases, it is possible, having studied the available IT segments, to arrange the release of a product that is sufficiently in demand, for which people are willing to pay.

Facts about imperfect competition

Under imperfect competition modern economists understand the state of the market, in which individual suppliers of goods and services can, in one way or another, set prices that are comfortable for themselves. For example, due to the low saturation of the segment or due to its monopoly position in the market.
There are a number key factors formation of imperfect competition:

• legislative regulation of prices;
• prevalence of dumping, its support by major market players;
• the presence of significant barriers to the entry of new players into the market;
• uneven access of enterprises to markets.

Again, it is difficult to find a national economy that fully corresponds to the signs of imperfect competition. In almost every country in the world there are market segments in which the factors indicated above do not appear, and therefore perfect competition may well form in them.

Comparison

The main difference between perfect competition and imperfect competition is that in the first case, market players cannot set prices that are comfortable for themselves. With imperfect competition, such opportunities are available for individual enterprises that are monopolists, or for the majority - if the market segment is not saturated.

Having determined what is the difference between perfect competition and imperfect competition, we fix the facts we have discovered in the table.

Table

Competition is an economic process aimed at the interaction, interconnection and struggle between enterprises operating on the market in order to ensure all opportunities for marketing their own products, as well as meeting the needs of consumers.

Competition features

In the specialized literature, the following functions are distinguished that competition performs:

• establishing or identifying market value any product;
• equalization of cost with the distribution of profits, depending on the labor costs for production;
• distribution regulation financial resources between industries and sectors.

There are various classifications of this economic indicator. For example, perfect and imperfect competition. Let us dwell in this article in more detail on some types in more detail.

Varieties of competition by scale of development

Within this classification, the following types should be distinguished:

• individual, in which one participant seeks to take a certain place in the market to select the best conditions for the sale of services and goods;
• local, determined among sellers in one territory;
• sectoral (within one industry there is a struggle for maximum income);
• intersectoral, expressed in the rivalry of sellers various industries in the market for additional attraction of buyers to obtain a large income;
• national, represented by the competition of commodity owners within one state;
• global, defined as the struggle of business entities and various countries within the global market.

Types of competition in the context of the nature of development

The economic indicator according to the nature of development is divided into regulated and free. Also in the economic literature, you can find the following types of competition: price and non-price.

Thus, price competition can arise by artificially lowering prices for specific products. At the same time, price discrimination is widely used, which occurs when the specified product is sold at different prices that are not justified in terms of costs.

This type of competition is most often used in the transportation of goods or products (often it is the transportation of non-durable goods from one outlet to another), as well as in the service sector.

Non-price competition is manifested mainly due to the improvement of product quality, production technologies, nanotechnologies and innovations, as well as patenting the conditions for the sale of finished products. This type of competition is based on the desire to capture a part of the market of a certain industry through the release of completely new products that are fundamentally different from analogues or by upgrading the old model.

Characteristics of perfect and imperfect competition

This classification takes place depending on the competitive equilibrium in the market. Thus, perfect competition is based on the fulfillment of any equilibrium prerequisites. These may include: many independent consumers and producers, free trade in production factors, independence of economic entities, comparability and homogeneity of finished products, as well as the availability of available information about the state of the market.

Imperfect competition is based on the violation of any prerequisites for equilibrium. This competition is characterized by the following properties: distribution of the market among large enterprises with limited independence, differentiation of finished products and control of market segments.

Advantages and disadvantages of competition

Perfect and imperfect competition have their advantages and disadvantages.

So, based on the definition of perfect competition, which shows the state of the market, where there are producers and consumers that do not affect the market price, which means that there is no reduction in demand for products with an increase in sales volumes, the advantages include:

• facilitating the achievement of compliance with the interests of market participants by using a balanced supply and demand, achieving an equilibrium price and volume;
• ensuring efficient allocation of limited resources in accordance with the information on the pledged price;
• orientation of the manufacturer to the buyer - to achieve the main goal to meet some of the economic needs of the citizen.

Thus, perfect and imperfect competition contribute to the achievement of an optimal and competitive state of the market, in which there is no profit or loss.

With these advantages, there are some disadvantages of these types of competition:

• the presence of equality of opportunity while maintaining inequality of outcome;
• benefits that are not subject to division and individual evaluation in a competitive environment are not produced;
• lack of consideration for the different tastes of consumers.

Perfect and imperfect competition provide insight into how the market mechanism works, but are actually quite rare. The second type of competition determines the influence of producers and consumers on the price and its changes. At the same time, the volume of finished products and access of manufacturers to this market has some limitations.

There are the following conditions in which there are some types of competition (perfect and imperfect):

• in a functioning market, only a limited number of producers should operate;
• there are economic conditions in the form of barriers, natural monopolies, taxes and licenses for penetration into a particular production;
• The market of perfect and imperfect competition in information is characterized by some distortions and is biased.

These factors can contribute to the disruption of any market equilibrium due to the limited number of producers, which sets and subsequently maintains fairly high prices in order to obtain high monopolistic profits. In practice, you can meet the following types of competition (perfect and imperfect including): oligopoly, monopoly and monopolistic competition.

Classification of competition according to the demand and supply of goods or services

Within the framework of this classification, perfect and imperfect market competition take the following forms: oligopolistic, pure and monopolistic.

Considering the above in more detail, it can be noted that oligopolistic competition, in general, can refer to an imperfect form. The following are accepted as key characteristics of a functioning market: a small number of competitors that have a fairly strong relationship; significant market power (the so-called reactive position and measured by the elasticity of the enterprise's response to some behavior of competitors); limited number with the similarity of goods.

The conditions of perfect and imperfect competition are manifested for such industries as: the chemical industry (production of rubber, polyethylene, technical oils and certain types of resins), machine-building and metalworking industries.

Pure competition is a kind that can be classified as perfect competition. As key features this market the following can be distinguished: a significant number of both sellers and buyers without sufficient power to influence prices; undifferentiated (interchangeable) goods sold at prices that are determined by comparing supply and demand, as well as the absence of a kind of market power.

Market structures (perfect and imperfect competition) are widely used in industries that produce consumer goods: food and light industry, as well as the manufacture of household appliances.

There is another type of competition - monopolistic. Its main characteristics include: a large number of competitors with a balance of their forces; differentiation of goods, expressed by the buyer's consideration of goods in terms of their possession of distinctive features perceived by the market.

Types of market competition (perfect and imperfect) with the help of differentiation convey the following forms: technical specification, the taste of the drink, a combination of different characteristics. We should not forget about the increase in market power due to the differentiation of goods, which will protect the business entity and make a profit above the average market.

Market classification

The model of perfect and imperfect competition assumes the existence of competitive and non-competitive markets. As criteria for the difference between these markets, it is customary to consider the main features that are characteristic to some extent of the models:

• the number of enterprises in a particular industry with their size;
• production of goods: of the same type (standardized) or heterogeneous (differentiated);
• ease of entry into a particular industry or the exit of an enterprise from it;
• availability of market information to companies.

The market of perfect and imperfect competition has the following features:

• the presence of a certain number of buyers and sellers for a particular type of product, while each of them can produce (buy) only a small share of the total market volume;
• homogeneity of goods from the point of view of buyers;
• absence entry barriers for entry into the industry of a newly formed manufacturer, as well as free exit from it;
• availability of complete information for all market participants (for example, buyers are aware of prices);
• rationality in the behavior of market participants who pursue personal interests.

A firm under perfect and imperfect competition

The behavior of an enterprise depends not so much on time as on the type of competition. Considering the rational behavior of the company in conditions of perfect competition, it is necessary to note the following. The goal of any business entity is to maximize profits obtained by increasing the gap between price and costs. In this case, the price should be set under the influence of supply and demand in the market. If the company significantly increases the price of its own finished products, it may lose buyers who purchase similar products from a competitor. And the sales of the specified economic entity may decrease significantly. As for the costs, in this case their value is determined by the technologies used by the enterprise.

Thus, any business entity faces the question of determining the amount of produced and sold products to obtain maximum profit. Therefore, the company has to constantly compare the market price of products and the marginal cost of its manufacture.

An enterprise in conditions of imperfect competition

To achieve the rationality of the enterprise's behavior in the presence of imperfect competition in the market, the following conditions must be met.

In contrast to the above example, under conditions of imperfect competition, the manufacturer can already influence the price of his own products. If, in the conditions of functioning in the market of perfect competition, the income from the sale of products does not contain any changes (equals to the market price), then in the presence of imperfect competition, sales growth can reduce the price, which leads to a decrease in additional income.

In addition to maximizing profits, there are other types of motivation for the activities of the enterprise:

• simultaneously consider and increase sales;
• achievement by the enterprise of a certain level of profit, and then it is already possible not to make any efforts to maximize it.

Conclusion

Summing up the material presented in this article, it is necessary to note the following. The development of competition between manufacturers leads to the separation of large stable companies, with which it is already difficult for other manufacturers to “compete”. Before each newly created manufacturer who wants to take a certain place in a particular industry or market, there may be quite complex barriers. In this case, we are talking about the availability of the necessary financial resources. There are also some administrative barriers that provide for rather stringent requirements for "newcomers" to the market.

Evgeny Malyar

bsadsensedynamick

# business vocabulary

Terms, definitions, examples

In reality, competition is always imperfect, and is divided into types, depending on which condition corresponds to the market to a greater extent.

Article navigation

• Characteristics of perfect competition
• Signs of perfect competition
• Conditions close to perfect competition
• Advantages and disadvantages of perfect competition
• Advantages
• disadvantages
• perfect competition market
• Imperfect Competition
• Signs of imperfect competition
• Types of imperfect competition

Everyone is familiar with the concept of economic competition. This phenomenon is observed at the macroeconomic and even household level. Every day, choosing this or that product in the store, every citizen, willingly or not, participates in this process. And what is the competition, and, finally, what is it in general from a scientific point of view?

Characteristics of perfect competition

To begin with, a general definition of competition must be adopted. Regarding this objectively existing phenomenon, accompanying economic relations from the moment of their inception, various concepts have been put forward, from the most enthusiastic to completely pessimistic.

According to Adam Smith, expressed in his Inquiries into the Nature and Causes of the Wealth of Nations (1776), competition with its "invisible hand" transforms the selfish motives of the individual into socially useful energy. The theory of a self-regulating market assumes the denial of any state intervention in the natural course of economic processes.

John Stuart Mill, who was also a great liberal and a supporter of the maximum individual economic freedom, was more cautious in his judgments, comparing competition with the sun. Probably, this eminent scientist also understood that on a too hot day a little shade is also a blessing.

Any scientific concept involves the use of idealized tools. Mathematicians refer to this as having no width "line" or dimensionless (infinitely small) "point". Economists have a concept of perfect competition.

Definition: Competition is the competitive interaction of market participants, each of which seeks to obtain the greatest profit.

As in any other science, in economic theory a certain ideal model of the market is adopted, which does not fully correspond to the realities, but allows one to study the ongoing processes.

Signs of perfect competition

The description of any hypothetical phenomenon requires criteria to which a real object should (or can) aspire. For example, doctors consider a healthy person with a body temperature of 36.6 ° and a pressure of 80 to 120. Economists, listing the features of perfect competition (also called pure competition), also rely on specific parameters.

The reasons why it is impossible to achieve the ideal are not important in this case - they are inherent in human nature itself. Each entrepreneur, receiving certain opportunities to assert their positions in the market, will definitely use them. However, hypothetical Perfect competition is characterized by the following features:

• An infinite number of equal participants, which are understood as sellers and buyers. The convention is obvious - nothing limitless exists within our planet.
• None of the sellers can influence the price of the product. In practice, there are always the most powerful participants capable of carrying out commodity interventions.
• The proposed commercial product has the properties of uniformity and divisibility. Also purely theoretical. An abstract commodity is something like grain, but even it can be of different quality.
• Complete freedom of participants to enter or leave the market. In practice, this is sometimes observed, but by no means always.
• Hassle-free movement production factors. Imagine, for example, a car factory that can be easily transferred to another continent, of course, you can, but this requires imagination.
• The price of a product is formed solely by the ratio of supply and demand, without the possibility of influence of other factors.
• And, finally, the complete public availability of information about prices, costs and other information, in real life, most often constituting a trade secret. There are no comments here at all.

After considering the above features, the conclusions are:

1. Perfect competition in nature does not exist and cannot even exist.
2. The ideal model is speculative and necessary for theoretical market research.

Conditions close to perfect competition

The practical utility of the concept of perfect competition lies in the ability to calculate the optimal equilibrium point of the firm, taking into account only three indicators: price, marginal cost and minimum total cost. If these figures are equal to each other, the manager gets an idea of ​​​​the dependence of the profitability of his enterprise on the volume of production. This intersection point is visually illustrated by a graph on which all three lines converge:

Where:
S is the amount of profit;
ATC - minimum gross costs;
A is the equilibrium point;
MC - marginal cost;
MR - market price for the goods;
Q is the volume of production.

Advantages and disadvantages of perfect competition

Since perfect competition as an ideal phenomenon in the economy does not exist, its properties can only be judged by individual features that manifest themselves in some cases from real life (at the maximum possible approximation). Speculative reasoning will also help to determine its hypothetical advantages and disadvantages.

Advantages

Ideally, such competitive relations could contribute to the rational distribution of resources and the achievement of the greatest efficiency in production and commercial activities. The seller is forced to reduce costs, since the competitive environment does not allow him to raise the price. In this case, new economical technologies, high organization of labor processes and all-round thrift can serve as means of achieving advantages.

In part, all this is observed in real conditions of imperfect competition, but there are examples of a literally barbaric attitude towards resources on the part of monopolies, especially if state control is weak for some reason.

An illustration of the predatory attitude to resources can be the activities of the United Fruit company, which for a long time ruthlessly exploited the natural resources of the countries of South America.

disadvantages

It should be understood that even in its ideal form, perfect (aka pure) competition would have systemic flaws.

• First, its theoretical model does not provide for economically unjustified spending on achieving public goods and raising social standards (these costs do not fit into the scheme).
• Secondly, the consumer would be extremely limited in the choice of a generalized product: all sellers offer in fact the same thing and at about the same price.
• Third, an infinitely large number of producers leads to a low concentration of capital. This makes it impossible to invest in large-scale resource-intensive projects and long-term scientific programs, without which progress is problematic.

Thus, the position of the firm under conditions of pure competition, as well as the position of the consumer, would be very far from ideal.

perfect competition market

The closest to the idealized model at the present stage is the exchange type of the market. Its participants do not have bulky and inert assets, they easily enter and leave the business, their product is relatively homogeneous (estimated by quotations). There are many brokers (although their number is not infinite) and they operate mainly with supply and demand values. However, the economy does not consist of exchanges alone. In reality, competition is imperfect, and is divided into types, whichever condition suits the market best.

Profit maximization in conditions of perfect competition is achieved exclusively by price methods.

The characteristics and model of the market are important for determining the possibilities of functioning in conditions of imperfect competition. It is hard to imagine that a huge number of sellers offer absolutely the same type of product, which is in demand among an unlimited number of buyers. This is the ideal picture, suitable only for conceptual reasoning.

In the real world, competition is always imperfect. At the same time, there is only one common feature of the markets of perfect and monopolistic competition (the most common) and it consists in the competitive nature of the phenomenon. There is no doubt that business entities seek to achieve advantages, take advantage of them and develop success up to full mastery of all possible sales volumes. In all other respects, perfect competition and monopoly differ significantly.

Imperfect Competition

Real, that is, imperfect competition, by nature tends to disturb the balance. As soon as the leading, largest and strongest players stand out in the economic space, they divide the market among themselves, without ceasing to compete. Thus, most often the matter is not in the degree of "perfection" of competition, but in the very nature of the phenomenon, which has limited properties of self-regulation.

Signs of imperfect competition

Since the ideal model of "capitalist competition" has been discussed above, it remains to analyze its differences with what happens in a functioning world market. The main signs of real competition include the following points:

1. The number of manufacturers is limited.
2. Barriers, natural monopolies, fiscal and licensing restrictions objectively exist.
3. Market entry can be difficult. Exit too.
4. Products are produced in a variety of quality, price, consumer properties and other characteristics. However, they are not always separable. Is it possible to build and sell half of a nuclear reactor?
5. Mobility of production takes place (in particular, towards cheap resources), but the processes of moving capacities themselves are very costly.
6. Individual participants have the opportunity to influence the market price of the product, including non-economic methods.
7. Technology and pricing information is not public.

From this list it is clear that the real conditions modern market are not only far from the ideal model, but most often contradict it.

Types of imperfect competition

Like any non-ideal phenomenon, imperfect competition is characterized by a variety of forms. Until recently, economists simplistically divided them according to the principle of functioning into three categories: monopoly, oligopolistic and monopolistic, but now two more concepts have been introduced - oligopsony and monopsony.

These models and types of imperfect competition deserve detailed consideration.

Oligopoly

There is competition in the market, but the number of sellers is limited. Examples of such a situation are large supermarket and retail chains or mobile operators. Entry into the business is difficult due to the need for huge initial capital investments and permits. The division of the market often (not always) occurs according to the territorial principle.

Monopoly

Full sole mastery of the market in most cases is not allowed legislative norms. The exceptions are usually natural monopolies owned by the state, as well as suppliers with reasonable ownership of the product delivery infrastructure (for example, electricity, gas, water, heat).

Monopolistic competition

It should not be confused with monopoly, although the terms are consonant. This type of competition is characterized by the activity of a limited number of suppliers offering a product similar in consumer properties.

An example is the relationship of manufacturers, for example, household appliances and electronics. Their range is usually similar, but there are differences in quality and price. The market is divided between several leading brands. If one of them leaves, the vacated niche will be quickly divided among the remaining participants.

Monopsony

This type of imperfect competition occurs when only one consumer can purchase a manufactured product. There are types of products intended, for example, exclusively for state structures (powerful weapons, special equipment). In economic terms, monopsony is the opposite of monopoly. This is a kind of dictate of a single buyer (and not a manufacturer), and it is not common.

There is also a phenomenon in the labor market. When only one, for example, a factory operates in a city, then the average person has limited opportunities to sell his labor.

Oligopsony

It is very similar to monopsony, but there is a choice of buyers, albeit small. Most often, such imperfect competition occurs between manufacturers of components or ingredients intended for large consumers. For example, some recipe component can only be sold to a large confectionery factory, and there are only a few of them in the country. Another option - a tire manufacturer seeks to interest one of the car factories for the regular supply of its products.

Imperfect competition is an economic phenomenon, a market model in which manufacturing firms have the opportunity to have a real impact on the price of goods. On the other hand, there is the concept of perfect competition. This economic model is a system characterized by an infinite number of buyers and sellers, homogeneous and divisible products, high mobility of production resources, equal and complete information access of all participants to the price of products, goods, and the absence of any barriers to entry and exit to the market. Violation of at least one of these conditions theoretically means imperfect competition.

It is clear that achieving the conditions of pure competition is practically impossible, while imperfect competition is a phenomenon that is widespread everywhere.

Imperfect competition as an economic phenomenon

Based on the properties inherent in the conditional model of perfect competition, it is possible to determine what features are inherent in imperfect competition and how they manifest themselves in real market conditions.

This structure is characterized by various kinds of barriers that restrict entry into and exit from a particular market sector. There are limitations in product price information. The product itself is either unique, or its properties are differentiated compared to others, which leads to the ability of manufacturers and sellers to control prices for it: to overestimate, to keep it at a certain level. The goal is to maximize profit.

A striking example of imperfect competition are natural monopolies - firms whose activities are related to the supply of energy resources (electricity, gas) to the population. At low costs, such monopolists can set any price for their products in the future, while entry barriers to this market for newcomers are insurmountably high.

The characteristic features of market relations under imperfect competition are thus determined quite firmly:

1. Monopoly, small and medium business present on the market at the same time. They compete with each other, but monopolists, to one degree or another, have an advantage in regulating prices. This applies to both buyers and sellers of the product.
2. Imperfect competition in the future is aimed at monopolizing the market (sales, raw materials, market work force etc.), in contrast to the perfect, which is characterized by the main goal - the sale of goods.
3. The process of competition captures not only sales markets (retail, wholesale), but also production. Innovative developments in the manufacturing sector are turning into a method of dealing with competitors. The purpose of their implementation is to reduce production costs.
4. Various methods of competition are used: from the use of price levers, as the most obvious, to non-price ones, aimed at improving the properties of the product, improving marketing and advertising policies. Non-economic methods are also used, which are usually referred to as unfair competition.

Forms of struggle for markets under imperfect competition have the following characteristics:

• price- lowering prices for products, reducing costs in the production and marketing process, manipulating pricing, price maneuvers designed to attract a buyer;
• non-price- emphasis on the quality of the product, attracting customers with the help of various promotions, offering a larger volume of goods or services for an equal price, non-standard advertising campaigns;
• non-economic- industrial, economic espionage, bribery of responsible persons, etc.

Imperfect competition in all its diversity was considered in the works of E. Chamberlin, J. Hicks, J. Robinson, A. Cournot.

Forms of imperfect competition

Oligopoly characterized by a fairly limited number of sellers of goods or services (market of communications services). Oligopsony- a fairly limited number of buyers (labor market in small towns). At monopolies there is only one seller on the market (gas supply). At monopsony- the only buyer (sale of heavy weapons).

At monopolistic competition there are a large number of producers and sellers in the market sector selling similar in properties but non-identical goods (most often found in retail, household services).

Specialists conduct comparative analysis of these forms in the context of four market factors:

• the number of sellers (manufacturers);
• market product differentiation;
• the ability to influence prices;
• entry and exit barriers.

For example, in the case of a monopoly, the quantitative indicator is one, prices are completely controlled, products have unique qualities, and barriers to entry are very high, etc.

Labor market

Imperfect competition in the labor market is a complex phenomenon involving several important factors. It should be noted that this market sector is the most subject to regulation in order to minimize the negative consequences of the “imperfect market”.

Regulatory factors of the labor market:

1. State. Legislatively regulates the level wages, preventing it from completely falling under the influence of market processes (income indexation, the establishment of a minimum wage, etc.).
2. trade union organizations. Direct efforts to increase the level of remuneration of workers in the industry, the region, prepare and carry out the signing of agreements between trade unions and employers - market participants, in this direction.
3. Large firms, corporations. They set the level of remuneration of specialists, which they hold for a long time. They are not interested in the frequent revision of the level of remuneration of employees.

Market laws in relation to the labor market work in a special way. The sale of labor force, skills and abilities is fixed, as a rule, by a long-term employment contract, which gives guarantees of employment to the employee, despite fluctuations in supply and demand. In addition, an individual labor contract or agreement cannot contain conditions that are worse than those fixed in the collective agreement or in labor legislation.

The seller in this case receives guarantees of employment, is withdrawn from market relations for the duration of the contract with the buyer.

The presence of restrictions on worse conditions in comparison with the collective agreement does not allow the employer to endlessly worsen the conditions of individual agreements, choosing the most “compliant” sellers. This factor is most significant if there is no trade union organization.

Imperfect competition and government regulation

Imperfect competition, being far from ideal models of building an economy, has its own negative aspects and consequences: an increase in product prices that is not justified by an increase in costs, an increase in production costs themselves, a slowdown in progressive trends, a negative impact on competitiveness on a scale of world markets, and finally, a slowdown in development economy.

At the state, governmental level, there are always administrative barriers for market participants, for example, exclusive rights that the state gives to a particular company.

On a note! Regulatory barriers can be expressed not only in state regulation as such, but also in the possession of the right to rare natural resources, progressive scientific and technical developments, confirmed by a patent, a high level of start-up capital required to enter the market sector.

At the same time, the state, realizing the global danger of market monopolization, is fighting it. Antitrust regulation – a package of antitrust laws that is constantly evolving to reflect market trends. Based on it, administrative antimonopoly control of markets is carried out by authorized state antimonopoly structures. An effective mechanism for influencing monopolists is being developed.

Control is represented by a set of financial sanctions, the organizational mechanism does not affect the monopolists themselves, destroying them as a market phenomenon, but indirectly by supporting small and medium-sized businesses, reducing customs duties etc. Legislative regulation often directly prohibits certain economic steps that promote the formation of even larger monopolies, for example, the merger of large firms in a certain market sector.

Results

1. Imperfect competition, as opposed to a perfect, ideal model, exists in the real market structures of the modern economy. The purpose of imperfect competition is to capture the market, its monopolization.
2. Forms of imperfect competition differ in the number of sellers and buyers in a given market sector. You can conduct a comparative analysis of each form, paying attention to the level of barriers to entry into the market, the ability to influence prices, etc.
3. The labor market in conditions of imperfect competition is subject to many regulatory factors from the state, trade unions, and large companies.
4. The presence of an employment agreement leads to a temporary withdrawal of the seller from the labor market, allows him to guarantee stable employment, i.e. demand for the labor resources that it possesses.