Competition - What is it? types, and examples

Competition - What is it? types, and examples
Posted on 09-03-2022

Competence

A scenario where various economic agents carry out their commercial operations in a market.

What is the competition?

In economics, competition is called the scenario where various economic agents carry out their commercial operations in a market such as selling, buying, distributing, etc.

Therefore, it is said that an organization or individual is competitive when it uses certain strategies and methods planned in the market to position itself above the rest and obtain more profitability.

In a market, sellers, buyers, or even the State, can influence the prices of products, in such a way that the price established by some factor or economic agent will be established by the aforementioned, either by the law of supply and demand. , by some fixing or pricing strategy by sellers or producers, or any law established by the State.

Types of competition

The main types of competition are listed below.

perfect competition

That market situation in which neither the suppliers nor the demanders can influence the prices of the goods or services.

In this type of competition, the economic agents involved actively participate by providing many products and consuming in large quantities, which generally leads to a balance of supply and demand which sets the price of the products, with which consumers must operate and bidders in the market.

imperfect competition

That situation contrary to perfect competition, this situation occurs when economic agents can influence the prices of goods and services.

In this type of competition, the suppliers involved have the ability to influence the market as there are not many organizations that offer their products.

There are many factors that can lead a market to this point of competition, among them stand out: better advertising campaigns, better-established relationships with consumers, better costs related to production, among others.

Imperfect competition, in turn, has subdivisions, which will be listed below:

  • Monopoly: that situation in which the manufacture or exploitation of a certain good or service is given by a single company, producer, or person, that is, with a monopoly there is a single supplier that dominates all market demand. It usually occurs because of a market failure or legal privilege.
  • Oligopoly: that situation in which the market is led by a minority of producers, that is, it is generated when there are few bidders for many applicants. These bidders have enough power to influence the price of the products.
  • Monopsony: that situation in which there are several bidders, but there is only one buyer, therefore, this single consumer has the ability to set the price of goods or services. Consequently, the suppliers must adapt to the demands of the consumer, in price and in quantities.
  • Oligopsony: that situation in which there are few consumers, but several suppliers. In this market condition, buyers have the power to set the costs of the products, therefore, the products must be adjusted to the demands of the consumers.

Examples of competition

Here are some examples of competition:

  • The gas service is usually offered by a single company, so having a single supplier creates an imperfect market situation.
  • The PEMEX company is the only buyer in Mexico of certain specific pipes and valves used in oil pipelines, which is an example of Monopsony.
  • The agriculture sector has a wide variety of vendors selling identical products at the same cost, so there is great competition.
  • Gas companies that are unique in their country and offer the product through a single medium, which cannot be replaced by another equal.

 

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