Imperfect competition is when markets lack the conditions of perfect competition, allowing forces to manipulate prices. Factors contributing to this include lack of information, marketing differentiated products, and barriers to entry. Joan Robinson introduced the concept in 1933.
Imperfect competition is a term used to describe a market in which the conditions that characterize perfect competition are not present. In the real world, it is virtually impossible to achieve the goal of perfect competition, in which no one force has the power to manipulate the market. As a result, most markets around the world exhibit characteristics of imperfect competition. Some examples of markets that could be considered examples of this type of market include: oligopoly, monopolistic competition, monopoly, and monopsony.
In this type of market, the consumption costs of products do not come close to the production cost due to the fact that prices are controlled to some extent by sellers and buyers’ activities. There are a number of factors that can lead to imperfect competition, and it is not uncommon to see multiple factors involved in a single market. These factors can sometimes be easy to identify and in other cases they can be more obscure in nature or origin, making it difficult to determine what forces are acting on a market.
One problem is the lack of accurate information. Both buyers and sellers can withhold information in order to get a better deal, and this can contribute to imperfect competition. Sellers who market differentiated products can also contribute, as the question for consumers comes down less to final cost than to quality and product associations. Another feature sometimes seen in this market structure is the presence of barriers that can make it difficult to enter the market, such as high start-up costs or strict government regulations.
For the most part, businesses and consumers have an interest in getting ahead and staying there, whether in an individual deal or in the broader market. As a result, they can work against each other, contributing to the development of imperfect competition. It is rare to find a market in which competition is perfectly balanced and can be said to be “perfect,” especially since perfect competition may not necessarily generate the best profits for companies.
The idea of imperfect competition was introduced in the 20th century by Joan Robinson, a British economist. Robinson discussed the concept in 1933 and contributed other scholarly work to the world of economics. She spent a lot of time studying developing nations and was very interested in the manifestations of communism that she saw in Russia and China. Her husband was also a noted economist.
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