Imperfect Competition

AAA

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.


INVESTOPEDIA EXPLAINS '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 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 >>
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. 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.
  3. Personal Finance

    Antitrust Defined

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

    Economic Moats: A Successful Company's Best Defense

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

    Selecting A Second-Tier Company

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

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  7. Economics

    Calculating Income Elasticity of Demand

    Income elasticity of demand is a measure of how consumer demand changes when income changes.
  8. Economics

    Understanding Implicit Costs

    An implicit cost is any cost associated with not taking a certain action.
  9. Fundamental Analysis

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.
  10. Economics

    Understanding Diseconomies of Scale

    Diseconomies of scale is the point where a business no longer experiences decreasing costs per unit of output.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!