Imperfect Competition

DEFINITION of 'Imperfect Competition'

A type of market that does not operate under the rigid rules of perfect competition. Perfect competition implies an industry or market in which no one supplier can influence prices, barriers to entry and exit are small, all suppliers offer the same goods, there are a large number of suppliers and buyers, and information on pricing and process is readily available. Forms of imperfect competition include monopoly, oligopoly, monopolistic competition, monopsony and oligopsony.


BREAKING DOWN 'Imperfect Competition'

Perfect competition is often viewed as a theoretical model, because every industry or market operates in some form of imperfect competition. For example, some industries rely on heavy initial capital investment, such as industrial manufacturers and telecom providers. This makes the prospect of having many competitors practically impossible. In the real world, markets are evaluated by their relative closeness to perfect competition, and efforts are made to approach it.

RELATED TERMS
  1. Perfect Competition

    A market structure in which the following five criteria are met: ...
  2. Judo Business Strategy

    A plan for managing a company by using speed and agility to mitigate ...
  3. Dual Pricing

    The practice of setting prices at different levels depending ...
  4. Coopetition

    Cooperation between competing companies. Businesses that engage ...
  5. Leonid Hurwicz

    A professor of economics at the University of Minnesota and winner ...
  6. Economic Moat

    The competitive advantage that one company has over other companies ...
Related Articles
  1. Stock Analysis

    The 5 Best Alternatives to Zillow & Trulia

    Understand the online real estate industry and how Zillow and Trulia are industry leaders. Learn about alternatives to Zillow and Trulia.
  2. Stock Analysis

    Who Are American Airlines’ Main Competitors? (DE, JBLU)

    Understand what makes American Airlines a good company and what sets it apart in the industry. Learn about the top four competitors to American Airlines.
  3. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  4. Markets

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  5. Personal Finance

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  6. Active Trading

    Economic Moats: A Successful Company's Best Defense

    Find out why some companies thrive while others flounder.
  7. Economics

    Selecting A Second-Tier Company

    Find out why an industry's "little guys" can be big winners.
  8. Economics

    Economist Guide: 5 Lessons Milton Friedman Teaches Us

    Find out what can still be learned from the late economist Milton Friedman, a Nobel prize winner and champion of free market economics.
  9. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  10. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
RELATED FAQS
  1. Why should an investor include the airlines sector in his or her portfolio?

    The global airline sector is expected to benefit from robust growth as airlines continue to attract more passengers. Demand ... Read Full Answer >>
  2. Which countries make up the majority of the global airline sector?

    The airline industry is a significant driver of economic growth. Smaller airlines are merging and forming companies better ... Read Full Answer >>
  3. Do all economists believe in perfect competition?

    No economist believes perfect competition is representative of the real world. Very few believe perfect competition is ever ... Read Full Answer >>
  4. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  5. What's the difference between monopoly and monopsony?

    The difference between a monopoly and monopsony lies in the entity that is being singularly controlled. A monopoly exists ... Read Full Answer >>
  6. Does perfect competition exist in the real world?

    First, let's review what economic factors must be present in an industry with perfect competition: 1. All firms sell an ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center