Let us list the features of perfect competition.
A vast and homogeneous market
It has a significant number of both buyers and sellers. The latter are small companies that lack the ability to control prices by regulating production volumes. They offer products with minimal differences in characteristics, functions, and prices. As a result, buyers cannot distinguish products based on physical parameters (size, color, etc.) or intangible values (e.g. branding).
The large number of buyers and sellers ensures the stability of supply and demand in this market. This means that the former can easily replace the goods of one manufacturer with similar products from another.
Transparency and accessibility of information
Understanding the mechanisms qatar email list of component sourcing and pricing from suppliers can make or break a market for a particular company. Thus, the availability of information is a useful feature for market participants.
In knowledge-based and research-based industries (e.g. pharmaceuticals and technology), information about competitors’ patents and research helps to create competitive strategies and provides additional guarantees of product quality. Each company can produce goods/services with the same efficiency and using the same technologies as others. This helps to establish a level playing field and stimulates competition.
Lack of regulators
This is another sign of perfect competition. State control allows for the formation of a product market to be influenced by the introduction of regulations and price changes. Regulatory bodies can control the entry of firms into the market by adopting certain operating standards. For example, pharmaceutical companies face a large list of regulations governing the development, production, and sale of medicines.
Characteristics of perfect competition
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To comply with the regulations, companies need to invest in staff, hiring lawyers, quality control staff, and purchasing expensive equipment to produce goods. This makes the production of drugs very expensive, making it difficult to bring them to market. The technology industry operates under less regulation than the pharmaceutical industry. Therefore, entrepreneurs can start companies with a small initial investment, making it easier to start a business.
In a perfectly competitive market, this level of control is absent. The entry and exit of companies is not regulated, so companies do not have to spend large amounts of money on personnel and capital assets. Such conditions allow companies to adjust their activities in accordance with market needs.