Competition and its role in the economy. Types of competition
26. COMPETITION
Competition- (from Lat. To compete) - competition in the market between sellers for more profit. Three elements that are necessary for the existence of a market economy: competition, freedom of choice and private (non-state) property. Competition is inevitable, as each manufacturer or intermediary strives to sell as much of the product as possible on the market for maximum profit.
Types of competition: perfect and imperfect.
Perfect (free) competition- competition, in which the price of a product is formed depending on the supply and demand of this product. The price depends on the behavior of buyers and sellers. Conditions necessary for free competition: a lot of buyers and sellers on the market, the identity of goods and services for all sellers, lack of control over the price of goods and services (the buyer negotiates the price with the seller), freedom of visits to the market by sellers and buyers, freedom of access to information. An example of free competition: agricultural markets.
Imperfect competition- competition in which the market is dominated by one producer who seeks to independently set prices for goods. Features of imperfect competition: the domination of one manufacturer, the establishment of high prices for goods by them, tough methods of dealing with competitors.
Types of imperfect competition: monopoly and oligopoly.
Monopoly- (from mono - one, poly - to own) - the dominance of one large manufacturer in the market:
natural monopoly protected by law from competition, since it has benefits and sells irreplaceable resources (for example, RAO Gazprom - gas, RAO UES - electricity);
artificial (illegal) monopoly- collusion of enterprises for maximum profit. To this end, the monopolists agree among themselves to overstate the price of all sellers of products. The buyer, having no other choice, is forced to buy goods at inflated prices. Forms of artificial monopolies: cartel (conspiracy on the production, marketing of goods, hiring labor and conspiracy on the price level), syndicate (association for the joint sale of goods), trust (complete association of enterprises).
Oligopoly- dominance in the market of several large manufacturers (from 3 to 5). Examples of oligopoly can be found in the automotive industry, the production of household appliances and computers.
Competition protection policy. The state seeks to protect free competition and limit the expansion of imperfect competition. The government issues antitrust laws, studies the market, fights against artificial (illegal) monopolies, supports natural monopolies, and controls prices and product quality. The legislation sets maximum prices for certain types of goods (services). The state develops and strengthens market structures and small businesses (small businesses).
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Class: 10
Equipment: interactive whiteboard (screen), teacher's computer, Microsoft Office PowerPoint 2003, presentation, scales with two bowls, paper weights.
Lesson objectives:
- educational: determine the economic importance of competition, characterize the types of competition, identify the advantages and disadvantages of competition;
- developing: develop the ability to think independently, logic, apply previously studied material to assimilate new material;
- educating: to educate students' ability to independently acquire knowledge, responsibility, attention.
During the classes
1. Organizational stage
Teacher: "Hello. Today you and I have to study a fairly voluminous material, so I ask everyone to tune in to intensive work. " (A worksheet is distributed to each student in advance; slide # 1 on the board).
2. Updating knowledge
Teacher: “The modern market economy is a complex organism, consisting of a huge number of various industrial, commercial, financial and information structures interacting against the background of an extensive system of legal norms of business, and united by a single concept - the market. Today in the lesson we will analyze the key concept that expresses the essence of market relations. Your task, after listening to the parable from the famous book "The Cash Flow Quadrant" by Robert Kiyosaki, determine the topic of the lesson. " (further the teacher tells a parable)
3. Learning new material
Teacher: “So, what economic concept is described in this situation ( pupils: “rivalry") and the topic of our lesson: (students: “Competition”). There are many statements about this concept, for example: Evin Cannan believes that “economic competition is not a war, but rivalry in the interests of each other. This is an incentive for business development ”. But Anthony de Mello in the collection “One Minute of Stupidity” wrote that competition is the source of universal evil, it brings out the worst in you, because it teaches you to hate. How many people, so many opinions. Tell me, in order to agree with them or refute what we need to do in the lesson (students: “identify economic importance competition, determine the merits and demerits of competition ")... To do this, consider the following questions in the lesson: 1) Competition: definitions and functions; 2) Types of competition; 3) The advantages and disadvantages of competition. Let's move on to the first question. We have already met this concept when studying the types of economic systems. Therefore, try to define the concept of "competition", based on the previously acquired knowledge. (students offer their options, then the material is summarized by the teacher). Competition- (from Lat. Concurrere - to collide) - the struggle of independent economic entities for limited economic resources. A. Smith interpreted competition as a behavioral category, when individual sellers and buyers compete in the market for more profitable sales and purchases, respectively. Competition performs the following functions in the economy: regulation, motivation, distribution, control (students are asked to correlate the name of the function with a description of reality, slide 7) The performance of any company strongly depends not only on its costs, but also on the type of competition that one has to face when selling your goods. Those. we move on to the second question: Types of competition. Your task is to identify the main types of competition along the way and enter their distinctive features in the table (see the appendix), which you will pass for verification at the end of the lesson. "
The teacher on the blackboard shows an example of the type of competition, and the students independently, according to the available criteria, determine the main features. The table is checked (students name their options).
Teacher: “To consolidate this material, I suggest you work with the following exercise, your task is to read carefully and answer the questions, arguing your answer (see appendix).
After consolidating the material on the second question, students are asked to vote “for” or “against” the statement: “Competition is a business incentive”. Each student puts a paper weight on the scales “For” or “Against” the competition, while arguing for his answer.
The answers may be as follows:
Advantages:.
1. Promotes more efficient use of resources;
2. Causes the need to respond flexibly and quickly adapt to changing production conditions;
3. Creates conditions for the optimal use of scientific and technological achievements in the field of creating new types of goods, etc .;
4. Provides freedom of choice and action for consumers and producers;
5. Targets manufacturers to meet the diverse needs of consumers and to improve the quality of goods and services.
Flaws:
1. Does not contribute to the preservation of non-renewable resources (animals, minerals, forests, water, etc.);
2. Negatively affects the ecology of the environment;
3. Does not ensure the development of production of goods and services for public use (roads, public transport etc.);
4. Does not create conditions for the development of fundamental science, the education system, many elements of the urban economy;
5. Does not guarantee the right to work (stimulates unemployment), income, rest;
6. Does not contain mechanisms that prevent the emergence of social injustice and the stratification of society into rich and poor.
4. Consolidation of the studied material
Students are encouraged to complete the test (see appendix)
Lesson summary
Each of you has already received a grade for the test, you saw how much you mastered the new material, but I would like you to answer the following questions at the end of the lesson:
- What economic term were you talking about in this lesson?
- What was the goal set for us? Have we reached it?
- What did you like (dislike) in the lesson?
- Can you evaluate your work in the lesson? (it is suggested to fill in the assessment sheet, see. Appendix)
Homework: paragraph 7.1 (basics economic theory/ ed. S.I. Ivanova); give examples of sectoral markets in the Ramensky district for each type of competition.
MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION
FEDERAL STATE EDUCATIONAL INSTITUTION
HIGHER PROFESSIONAL EDUCATION
"ACADEMY OF BUDGET AND TREASURY OF THE MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION"
OMSK BRANCH
COURSE WORK
BY DISCIPLINE:
Economic theory
Student (ki ) Borisova Elena
Group no. 1U1 Course no. 1
Topic: Competition, its types and role in economic development
Faculty financial - accounting
Speciality accounting, analysis and audit
supervisor Korneenkova Tatiana Pavlovna
___________________ ____________________ ___________________
Date of admission Admission to protection Work protection
work in the dean's office Lecturer's signature Assessment
Teacher signature
Omsk - 200 9 / 20010 academic year
Work plan:
Chapter 1. The essence of competition, conditions of its existence and functions.
Chapter 2. Types of competition
2.1. Perfect and imperfect competition
2.2. Price and non-price competition
Chapter 3. Imperfect competition: a form of competition in the conditions of monopoly production
3.1. Pure competition
3.2. Oligopoly
3.3. Monopoly
3.4. Pure monopoly
Chapter 4. The role of competition in the development of a market economy.
Conclusion
Bibliography
Introduction
The main feature of the market economy is freedom of choice: the manufacturer is free to choose the products he produces, the consumer - in the purchase of goods, the employee - in the choice of the place of work, etc. But freedom of choice does not provide economic success automatically. It is won in the competition.
Competition is a key category market relations... It comes in various forms and is carried out in different ways.
As evidenced by general and special encyclopedic dictionaries and reference books, competition (from the Latin concurerre - to collide) is a rivalry between participants in the market economy for the best conditions for the production, purchase and sale of goods.
This term is ancient, as is the very phenomenon defined by this term. The deep roots of the term "competition" lie in the need for a constant struggle for existence, for relatively better living conditions, the extreme form of which can be considered the struggle for survival.
Competition occupies a dominant position in the economy of any state, but it has a variety of forms. The importance of competition in the economy of a country is also determined by the level of economic development of the country, its position and influence in the international environment of market relations.
With the transition of Russia to market methods of management, the role of competition in the economic life of society has increased significantly.
The fiercer the competition in the domestic market, the better prepared national firms are to fight for markets abroad, and the more advantageous consumers are in the domestic market both in terms of prices and product quality. After all, competitive products must also have consumer properties that would distinguish them favorably from similar products of other competitors.
Competition is at the core of the modern market mechanism, not only because the scale of its manifestation has increased immeasurably over the past decades. The efficiency of the market functioning is the higher, the more active the competition and the more better conditions for its manifestation. Competition requires an optimal combination of economic, technological and legal prerequisites. Underestimation of this condition hinders the existence of competition or even nullifies it. The result is a stagnation in the economy, a relative or absolute decrease in its efficiency, a possible decline in the living standards of the country's population.
In this regard, the study of competition, maintaining a competitive environment in the Russian Federation, as in all developed countries now, has become an important task state regulation economy.
Thus, the purpose of this work is to consider competition from different angles, to determine its functions in the economy, the main types, as well as the conditions of existence, and the role in the market economy. When considering the types of competition by the type of market structures, much attention is paid to imperfect competition, its types, features, advantages and disadvantages, since this form of competition is now the most common. The work also touches on the issue of competition in Russia. In Russia, during the years of economic transformations, a special system of economic management, incomprehensible to the whole world, has developed. In accordance with this, the actions of competitive patterns are chaotic and have their own special forms.
Chapter 1. Theoretical aspects of the concept of "competition"
The concept of competition is fundamental in the economic theory of market relations. Competition manifests itself at all levels of the capitalist economy - from the microlevel (firm) to the global economic system. Even the creators of socialism, condemning some forms of competition, tried to lay it in the socialist economy, calling it "socialist competition."
The economic success (and often the survival) of the subject of the market economy primarily depends on how well he has studied the laws of competition, its manifestations and forms, and how ready he is to compete.
The theme of competition was also reflected in the annual message of the President of the Russian Federation Dmitry Medvedev. To the Federal Assembly of the Russian Federation, with which he spoke on March 30 of this year. The President noted: “The main meaning of the country's development, the main idea of our entry into the 21st century should be to increase competitiveness Russian economy... All actions of the President, Federal Assembly, Government, every ministry and department, every politician should be assessed not from the point of view of compliance with liberal or anti-liberal views, but according to a single criterion - whether these actions contribute to strengthening or weakening the country's competitiveness. "
Competition is actually of great importance in the economic life of a society. In this regard, this term should be scrutinized both at the firm level and throughout the country.
This chapter will consider the reflection of competition in economic science, the interpretation of the term "competition" by various theoretical schools, the essence, types, main functions and conditions for the existence of competition.
- Evolution of approaches to the study of competition in economics.
Competition - translated from Latin means "to collide". In the very general view competition is rivalry between participants in the market economy for the best conditions for the production, purchase or sale of goods. Competition is the economic law of a market economy. It takes place between sellers and buyers, among sellers and among buyers.
The interpretation of the concept of competition in economics has gone through several stages. Competition as an economic phenomenon appeared during the establishment of trade relations and acquired its full value with the emergence of free market relations. At the same time, the most comprehensive theoretical provisions on the driving forces of the competitive struggle appeared. And the main merit in this is the classic political economy, and its main representative A. Smith. He viewed competition as a matter of course, permeating all sectors of the economy and limited only by subjective reasons.
Classical economic theory was characterized by behavioral approach... In particular, A. Smith understood the essence of competition as a set of interdependent attempts by various sellers to establish control in the market. Consequently, the emphasis was on the behavior of sellers and buyers, which was characterized by honest, non-collusive competition for more favorable terms of sale or purchase of goods. At the same time, prices were considered the main object of competition.
A. Smith identified competition with the “invisible hand” of the market - the automatically equilibrium mechanism of the market. He proved that competition, by equalizing the rates of profit, leads to an optimal distribution of labor and capital, a regulator of private and public interests.
The "invisible hand" can operate successfully only in conditions of rather intense competition. The mechanism of competition forces the entrepreneur to constantly look for ways to reduce production costs, otherwise it is impossible to reduce the price and increase profits due to an increase in sales.
Despite the fact that A. Smith did not consider the specific elements of the market mechanism that often impede the achievement of optimum, he did take the first step towards understanding competition as an effective means of price regulation:
On the basis of the theory of competitive prices, he formulated the concept of competition as rivalry that increases prices (with a reduction in supply) and decreases prices (with an excess of supply);
Defined the basic conditions for effective competition, including the presence of a large number of sellers, comprehensive information about them, the mobility of the resources used;
He was the first to show how competition, by equalizing the rates of profit, leads to the optimal distribution of labor and capital between industries;
He developed the elements of the perfect competition model and theoretically proved that in its conditions the maximum satisfaction of needs is possible;
Made a significant step towards the formation of the theory of optimal resource allocation in conditions of perfect competition.
Free competition, theoretical basis which was postulated by A. Smith, completely excludes any conscious control over market processes. The coordinating element in its theoretical provisions is the price system in an absolutely decentralized economy.
D. Ricardo, developing the ideas of price regulation of the market with the help of competition, built the most impeccable theoretical model of perfect competition, while functioning market system in the long run. This approach made it possible to get away from the "details" associated with state regulation, monopoly power, geographic features market, etc., which in the long term are not decisive.
For the conditions considered by D. Ricardo, it is fundamental that prices are formed only under the influence of supply and demand as a result of competition. Competition is critical in balancing prices. The generalizing element of the study was the “law of markets”, which postulates the tendency of an equilibrium state at full employment.
Significant results, complementing the model of perfect competition, but from the standpoint of the law of value, offered in "Capital" K. Marx.
In his opinion, competition, regulating the distribution of capital between industries, contributes to the tendency of the rate of profit to decrease, the formation of the average rate of profit. “Equality of profit in all branches of industry and the national economy presupposes complete freedom of competition, the freedom to flow capital from one branch to another. And private ownership of land creates a monopoly, an obstacle to this free flow. Due to this monopoly, for example, products Agriculture, characterized by a lower capital structure and a higher rate of profit, do not go into a completely free process of equalizing the rate of profit; the owner of the land, as a monopolist, gets the opportunity to keep the price above the average, and this monopoly price gives rise to absolute rent. "
The behavioral interpretation of competition was also characteristic of neoclassical political economy. However, the neoclassicists associated competition with the struggle for rare economic goods, as well as for consumer money, with which they can be purchased. Rarity, in their understanding, means that the amount of goods is insufficient in comparison with the needs of people.
The neoclassical school, which flourished in the 19th century, presented even more accurately and fully the impact of perfect competition on the price system. The economy of Western society became more and more centralized and free price regulation, at this stage of development, was applied in practice as never before, attracting the attention and inspiration of many prominent economists. Particularly significant in this sense are neoclassical concepts A. Marshall... Developing the main provisions of the classics, he more consistently and fully substantiated the mechanism of automatic establishment of equilibrium in the market with the help of perfect (pure) competition and the operation of the laws of marginal utility and marginal productivity. However, A. Marshall went much further. He was the first to criticize the "conventions" of the model of pure competition. The development of a theory for the analysis of partial and long-term sustainable equilibrium in the market, as well as taking into account the development of technology and consumer preferences when determining relative prices, made it possible to create the foundations of the theory of a new model of competition - monopolistic.
Critics of the perfect competition model have pointed to elements of monopoly that permeate the economy and are not reflected in the existing concept. The chronic deficit in the effective balance of many European countries, a sharp slowdown in export growth, an increase in the power of monopolies and other consequences of the first stage of the general crisis at the beginning of the 20th century have confirmed the inconsistency of non-intervention approaches in the process of establishing a market balance.
Along with the behavioral interpretation, starting from the end of the 19th century, another began to penetrate into economic theory, structural concept competition, which subsequently came out on top. Among its authors were F. Edgeworth, A. Cournot, J. Robinson, E. Chamberlin. The positions of these scientists in modern Western economic science are so strong that the term “competition” itself is most often used in a structural sense. The market is called competitive when the number of firms selling a homogeneous product is so large and the share of a particular firm in the market is so small that no firm alone can significantly affect the price of a product by changing the volume of sales.
The works of J. Robinson "The Economic Theory of Imperfect Competition" and E. Chamberlin "The Theory of Monopolistic Competition" summed up the discussions about the nature of pricing under monopoly conditions and the emergence of non-price forms of competition. Both authors proceed from the premise that the market price is not formed by collective actions of market participants, since the heterogeneity of the goods deprives the buyer of the opportunity to have complete information about prices, and the manufacturing firms - to compete with each other due to the lack of a choice of more efficient activities.
Introduced E. Chamberlain the concept of "monopolistic competition" has become an alternative to the concept of "pure competition". He argued that the essence of monopoly is control over supply, and therefore price, which is achieved by increasing the interchangeability of competing goods, i.e. product differentiation. Wherever there is some degree of differentiation, each seller has an absolute monopoly on his own product, but is also subject to competition from substitutes. Proceeding from this, he believed that it is legitimate to speak of the position of all sellers as “competing monopolists” under the conditions of the forces of “monopolistic competition”.
In developing his idea of the process of “product differentiation” as a natural reaction of competitors to an equally natural manifestation of competition itself, E. Chamberlain substantiates the growing influence of non-price competition factors on this process, bearing in mind that it is conditioned by special properties (brand name, packaging originality) and individual features the quality of goods and advertising.
Unlike E. Chamberlin, who linked monopolistic competition with one of the characteristics of the natural state of the market in equilibrium, J. Robinson saw in imperfect competition a violation and loss of the normal equilibrium state of the competitive economic system. As a result of her research, J. Robinson could well have drawn conclusions about specific measures of state intervention in the economy in order to eliminate the contradictions of imperfect competition revealed by her. A detailed justification of such measures was proposed several years later by J.M. Keynes.
Theories of state regulation of the economy in a market economy have two directions. One of them is based on the teachings of J.M. Keynes and his followers. The government interventions they recommend are called Keynesian. Another direction substantiates concepts alternative to Keynesianism, the authors of which are usually called neoliberals.
According to many economists, “ General theory » J.M. Keynes was a turning point in the economic science of the XX century. and largely determines economic policy countries and now. Its main idea is that the system of market economic relations is not perfect and self-regulating, and that the highest possible employment and economic growth can only be ensured by active government intervention in the economy.
The neoliberal concept is based on the idea of the priority of conditions for unlimited free competition not in spite of, but due to a certain state intervention in economic processes. Neoliberals advocate the liberalization of the economy, the use of the principles of free pricing, the leading role in the economy of private property and non-state economic structures.
This understanding of competition, as we can see, differs significantly from its definition in the classical theory, which did not distinguish between competition and rivalry. The classics, speaking of competition, had in mind only perfect competition, within which the interdependence of sellers is so small that it can be neglected. In a competitive market, all firms are independent of each other in the sense that the actions of one do not have any appreciable effect on the behavior of other firms. With such competitive behavior - rivalry, no firm can become a market leader, that is, monopoly is impossible.
In addition to the behavioral and structural interpretation of competition, in economic theory there is also a functional approach to competition, as well as the characterization of competition as a “procedure of discovery”.
Functional approach to the definition of competition is associated, in particular, with the name of the Austrian economist J. Schumpeter... In his theory of economic development, he defined competition as the struggle between the old and the new. This struggle is waged by entrepreneurs - the organizers of production, blazing new paths, implementing new combinations of resources. According to Schumpeter, the task of an entrepreneur is to implement innovations, to fight routine, not to do what others do, to become a “creative destroyer”. Then it can win the competition by ousting from the market those entrepreneurs who use outdated technologies or produce products that are not in demand.
Another Austrian economist and political philosopher - F. von Hayek considered competition even more broadly, understanding it as a "discovery procedure." In his opinion, it is important for an entrepreneur, focusing on raising or lowering prices for resources and the benefits produced with their help, to understand in which direction it is necessary to act, what, how and for whom to produce. In the marketplace, it is only through prices and competition that the hidden becomes apparent. Only the “procedure” of competition “reveals” what resources and in what quantity must be used, what, how much, where and to whom to sell.
In recent years new estimate competition was given in the works of modern American economist who developed the theory of competitive advantage, M.Porter... He gave a definition of the competitiveness of a product in terms of "the value of the product for the consumer." In his opinion, the value of any purchased product directly depends on the profit that its use will bring.
Porter believes that every competitive product has a selling price below its value in use. For the consumer, the unpaid part of the consumer value is equal to the additional profit received from the use of the product. For the supplier, it corresponds to the competitiveness of his products.
At the same time, the consumer is interested in the unpaid share to be as large as possible. The supplier's attitude to this value is ambiguous. On the one hand, he also benefits from its large size: a significant margin of competitiveness guarantees that it is his product that will be bought, on the other hand, by increasing the selling price and reducing the margin of competitiveness, he increases his profit.
Thus, three approaches to the definition of competition were considered, presented by various theoretical schools of economic science. Each approach has its own advantages and disadvantages, as economics developed, theorists in this field improved their ideas about competition as a driving mechanism of a market economy.
- The essence of competition, conditions of its existence and functions
In the system of a market economy, a firm operating in the market is considered not by itself, but taking into account the entire set of relations and information flows connecting it with other market participants. The environmental conditions in which the firm operates are commonly referred to as the firm's marketing environment. The marketing environment of a company is composed of a micro-environment and a macro-environment. The microenvironment is represented by forces that are directly related to the firm itself and its ability to serve its clientele, that is, suppliers, intermediaries, customers, competitors and contact audiences.
Thus, competitors are an important component of the marketing microenvironment of the company, without taking into account and studying which it is impossible to develop an acceptable strategy and tactics for the functioning of the company in the market. The presence of competing firms gives rise to such a phenomenon in the economy as competition.
Competition is ambiguous and not covered by any universal definition. Competition is both a way of doing business and a form of capital existence in which one individual capital competes with the other. Competition - rivalry, competition between producers on the market for the most favorable conditions for the production and sale of goods in order to obtain the maximum possible profit on this basis. At the same time, competition is a mechanism for automatic regulation of the proportions of social production.
There are other definitions of competition. In the literature devoted to this problem, there are three approaches to the definition of competition ( see Appendix 1).
Most important in defining competition is the fact that there is no market system without competition. Without competition, the market cannot reveal the creative principles of market actors, their initiative and search, does not realize everything that makes the market a driving force of human progress. Competition in a market economy is, first of all, a state, competition, comparison economic conditions and the results of business entities.
To better understand competition, it must be compared to a monopoly. The fact is that both one and the other type of relationship between market participants are asymmetric. The opposite of their properties is rooted in completely different indicators of the state of the market. A visual representation of this can be presented in the table, which characterizes the position of sellers of goods (see table 1).
Table 1
Comparative table of the concepts of "competition" and "monopoly"
Market Condition Parameters |
Competition |
Monopoly |
Number of sellers |
||
Barriers to entry and exit from the market |
Yes (no entry) |
|
Product differentiation |
No (identical products of the same kind) |
No (one product) |
Participation of Firms in Price Control |
Full control |
There are three main prerequisites, the presence of which is necessary for the functioning of the competition mechanism:
First, the equality of economic agents operating in the market (this largely depends on the number of firms and consumers);
Secondly, the nature of the products they produce (the degree of product homogeneity);
Third, the freedom to enter and exit the market (first of all, the absence of obstacles to entry in the form of organizational associations and structures).
Competitive tendencies in a developed market are much more stable and stronger than monopolistic ones. In reality, the winners in the competition are now large, now small, now strong, and sometimes even weak firms. The key to the question of why monopoly does not crowd out competition lies in understanding how different firms competing against each other are. Competition cannot be reduced to the struggle of the strong against the weak: in this case, superpowerful monopolies would really drive out all weaker rivals.
In reality, competition is based on a more complex formula. There are several types of business units, and each of them has its own characteristics: leading monopolies have strength, small firms have flexibility, specialized companies have adaptability to special market segments (“niches”), innovators have advantages of pioneers. In specific market situations, one or the other quality gains a decisive advantage.
Competition is objectively compulsory for market participants, and primarily for producers. It forces them to systematically apply new technologies, increase labor productivity, reduce or restrain the prices of manufactured products. In other words, competition systematically influences individual production costs in the direction of their reduction, forces them to save resources, to achieve the most rational combination of the factors of production used.
The essence of competition is manifested in the fact that, on the one hand, it creates conditions for which the buyer in the market has a great variety of opportunities to purchase goods, and the seller - to sell them. On the other hand, two parties take part in the exchange, each of which puts its own interest above the interest of the partner. As a result, both the seller and the buyer, when concluding an agreement, must make a mutual compromise in determining the price, otherwise the agreement will not take place, and each of them will incur losses.
An indispensable condition for competition is the independence of the subjects of market relations from certain "higher" and external "forces. This independence is manifested, firstly, in the ability to independently make decisions about the production or purchase of goods or services, and secondly, in the freedom to choose market partners. In the process of competition, economic entities, as it were, mutually control each other Competition is also an important tool for regulating the proportions of social production in market conditions.
Competition promotes the establishment of a certain order in the market that guarantees the production of a sufficient amount of quality goods that are sold at an equilibrium price.
The consequence of competition is, on the one hand, the aggravation of production and market relations, and on the other hand, an increase in the efficiency of economic activity, acceleration of scientific and technological progress. Competition refers to uncontrollable factors that affect the activities of an organization that cannot be controlled by the organization.
Having considered the essence of competition and the conditions for its existence, let us move on to defining the functions of competition.
The following functions of competition can be distinguished:
Regulation function. In order to withstand the struggle, the entrepreneur must offer products that the consumer prefers (consumer sovereignty). Hence, the factors of production, under the influence of prices, are directed to those industries where there is the greatest need for them.
Motivation function. For an entrepreneur, competition means a chance and a risk at the same time:
Enterprises that offer better quality products or produce them with lower production costs are rewarded in the form of profits (positive sanctions). This stimulates technological progress;
Enterprises that do not respond to the wishes of customers or violations of the rules of competition by their competitors in the market are punished in the form of losses or are forced out of the market (negative sanctions).
Distribution function ... Competition not only includes incentives for higher productivity, but also allows income to be distributed among businesses and households according to their effective contribution. This is in line with the prevailing competitive reward principle.
Control function ... Competition limits and controls economic strength each enterprise. For example, a monopolist can set a price. At the same time, competition gives the buyer a choice among several sellers. The more perfect the competition, the fairer the price.
Competition policy is designed to ensure that competition can fulfill its function. In every market economy, there is a danger that competitors will try to evade the binding rules and risks associated with free competition by resorting, for example, to price collusion or imitation of trademarks. Therefore, the state must publish regulations, which regulate the rules of competition and guarantee:
Competition quality;
The very existence of competition;
Product prices and quality should be the focus of competition;
The service offered must be commensurate in price and other contractual terms;
Legally protected trademarks and brands help the buyer to distinguish goods by their origin and originality, as well as to judge some of their qualities;
Time-limited patent protection (20 years) and registered industrial designs as well as industrial aesthetics.
Thus, competition in a market economy plays a significant role in economic development, retains its most important place in the market mechanism.
Competition embodies a spontaneously regulating (self-regulating) principle. The forces of competition act in the direction of increasing the influence of all factors of economic efficiency, leading to a dynamic equilibrium of supply and demand. Due to its spontaneous nature, competition, especially under the condition of its complete dominance in the market, can cause collateral negative economic and social consequences... Overall, however, it can be said that competition with its ruthless laws is the main engine of modern progress.
1.3. Types of competition
There are many criteria and approaches to the classification of competition ( see Appendix 2). In accordance with various approaches, they distinguish intersectoral, intrasectoral, functional, specific, objective, semi-closed, closed, open, homogeneous, homogeneous, heterogeneous, heterogeneous competition.
The diagram showing the classification of competition according to the methods of competition and the state of the market will be taken as a basis when considering the types of competition, since it is the most popular (see Figure 1).
Fig.1 Classification of competition by the state of the market and by the methods of rivalry.
1.3.1. Perfect and imperfect competition
There are many definitions of the term "perfect competition":
- tough conflicting competitiveness of economic entities, when none of them is able to exert a decisive influence on the general conditions for the sale of a homogeneous product in a given market;
- competition of economic agents on commodity market in which none of them is able to exert a decisive influence on the general conditions for the sale of a homogeneous product in a given market;
- view industry market where many firms sell a standard product and none of the firms has a large enough market share to influence the price of the product. The price for each firm is considered to be set by the market. Entry to and exit from the industry is free;
- the competitiveness of a large number of small buyers and sellers, each of whom has sufficiently complete market information, and therefore none of them can control market demand, the supply of goods to the market or the price of it. The product is standard. There are no entry-exit barriers;
Perfect (free) competition is based on private property and economic isolation. It assumes that there are many independent firms in the market, independently deciding what to create and in what quantities.
Perfect competition exists in such spheres of activity where there are a lot of small sellers and buyers of identical (identical) goods and therefore none of them is able to influence the price of the goods.
Here the price is determined by the free play of supply and demand in accordance with the market laws of their functioning. This type of market is called the "free competition market".
The existence of a huge number of buyers and sellers means that none of them has more information about the market than the rest. The seller, having come to the market, finds the already established price level, which is beyond his power to change, because the market itself dictates the price at every moment of time. This situation allows new sellers on equal terms (price, technology, legal terms) with already existing sellers to start production of products. On the other hand, sellers are free to leave the market, which implies the possibility of unhindered exit from the market. Freedom of "market" movement creates conditions for the fact that there is always a change in the number of producers in the market. At the same time, the remaining sellers still lack the ability to control the market, as they represent small-scale production and there are so many of them.
The perfect competition model is characterized by five features:
- The presence of a large number of economic agents, sellers and buyers;
- Maximum awareness of sellers and buyers about goods and prices.
- None of the sellers or buyers are able to influence the market price and each other;
- Uniformity of the products sold;
- Access to the market is not restricted by anyone or anything.
Compliance with all conditions ensures free communication between producers and consumers. Perfect competition is also a condition for the formation of the market mechanism, price formation and self-adjustment of the economic system through the achievement of an equilibrium state, when the selfish motives of individual individuals to obtain their own economic benefits are turned for the benefit of the whole society. It is easy to see that no real market satisfies all of the above conditions. Therefore, the scheme of perfect competition has mainly theoretical significance.
Perfect competition presupposes the fulfillment of the following conditions:
Let's consider each of the conditions in more detail.
1. Uniformity of products... For competition to be perfect, the goods offered by firms must meet the condition of product homogeneity. This means that the products of firms in the minds of buyers are indistinguishable, that is, the products of different enterprises are completely interchangeable.
Under these conditions, no buyer is willing to pay the firm a price higher than he would pay its competitors. After all, the goods are the same, buyers do not care which company they buy from, and they, of course, opt for the cheapest. That is, the condition of product homogeneity actually means that price differences are the only reason why a buyer may prefer one seller over another.
2. Small size... Further, with perfect competition, neither sellers nor buyers influence the market situation due to the smallness and multiplicity of all market participants. This means that there are a large number of small sellers and buyers in the market, just as any drop of water is made up of a gigantic number of tiny atoms.
At the same time, purchases made by the consumer (or sales by the seller) are so small in comparison with the total volume of the market that the decision to decrease or increase their volumes does not create either surplus or deficits. The aggregate size of supply and demand simply "does not notice" such small changes. So, if one of the countless beer stalls in Moscow closes, the capital's beer market will not become more scarce, just as there will be no surplus of a drink beloved by the people, if one more “point” appears in addition to the existing ones.
Inability to dictate the price to the market. The above restrictions (homogeneity of products, the large number and small size of enterprises) actually predetermine that, with perfect competition, market actors are not able to influence prices.
3. No barriers... The next condition for perfect competition is the absence of barriers to entry and exit from the market. When such barriers exist, sellers (or buyers) begin to behave like a single corporation, even if there are many of them and they are all small firms.
All sellers follow well-known informal rules (in particular, they keep prices at least at a certain level). Any outsider who decides to bring down prices and just trade "without permission" has to deal with bandits. And when, say, the Moscow government sends disguised police officers to the market to sell cheap fruit (the goal is to force the criminal “owners” of the market to prove themselves and then arrest them), then it is fighting to remove barriers to entry into the market.
On the contrary, the absence of barriers typical of perfect competition or the freedom to enter and leave the market (in the industry) means that resources are completely mobile and easily move from one activity to another.
In other words, the absence of barriers means absolute flexibility and adaptability of the perfect competition market. .
4. Perfect information... The last condition for the existence of a market of perfect competition is that information about prices, technology and probable profits is freely available to absolutely everyone. Firms have the ability to respond quickly and efficiently to changing market conditions by shifting the resources they use. There are no trade secrets, unpredictable development of events, unexpected actions of competitors. That is, decisions are made by the firm under conditions of complete certainty about the market situation or, which is the same, in the presence of perfect information about the market.
A “perfect competitor” is one who can sell whatever he wants at the current market price, but is unable to influence it up or down. In turn, a “fully competitive industry” is one that is made up exclusively of numerous perfect competitors.
The advantages of perfect competition include the following:
- production in conditions of perfect competition is organized technologically more efficiently (that is, equilibrium is established at the level of long-term and short-term minimum of average costs).
- the firm and the industry operate without surpluses and deficits. Therefore, the condition of long-term equilibrium in a competitive industry is actually tantamount to the identity of supply and demand for a given product. the break-even of firms in the long run is also of fundamental importance. On the one hand, this guarantees the stability of the industry: firms do not incur losses. On the other hand, there are no economic profits, i.e. income is not redistributed in favor of this industry from other sectors of the economy.
Perfect competition is not without a number of disadvantages:
- small businesses, typical of this market, are unable to use the most efficient technique, as economies of scale are often available only to large firms.
- the market of perfect competition does not stimulate scientific and technological progress. Small firms usually lack the funds to finance long and costly research and development activities.
Thus, for all its merits, the market of perfect competition should not be idealized. The small size of companies operating in the market of perfect competition makes it difficult for them to operate in a modern world saturated with large-scale technology and permeated with innovation processes.
Imperfect competition is defined as follows:
- a market where at least one of the signs of perfect competition is not observed;
- a characterization of a market where two or more sellers, with some (limited) price control, compete with each other for sales;
- markets in which either buyers or sellers take into account their ability to influence the market price.
Since the model of perfect competition is a theoretical abstraction, all really existing markets are imperfect to one degree or another.
In a perfectly competitive market, there are many sellers and buyers, none of whom are large enough to influence the market price. Consequently, buyers and sellers in a competitive market view the price as constant and out of their control. To maximize their profits, sellers choose an output such that marginal cost equals price.
However, in imperfectly competitive markets, individual sellers can influence the price they receive for their products. When figuring out how to maximize their profits, they naturally take this ability into account.
The prerequisites for imperfect competition are:
1) a significant market share of individual manufacturers;
2) the presence of barriers to entry into the industry;
3) heterogeneity of products;
4) imperfection (inadequacy) of market information.
Each of these factors separately and all of them together contribute to the deviation of the market equilibrium from the point of equality of supply and demand. So, the only manufacturer of a certain product (monopolist) or a group of conspiracy large firms(the cartel) is able to maintain inflated prices without the risk of losing customers, so there is simply nowhere else to take this product.
The criterion of imperfect competition is a decrease in the demand and price curve with an increase in the firm's output. Another formulation is often used: the criterion of imperfect competition is the negative slope of the demand curve for the firm's products.
Thus, if in conditions of perfect competition the volume of a firm's output does not affect the price level, then in conditions of imperfect competition such an influence exists.
The economic meaning of this regularity lies in the fact that a firm can sell large volumes of products with imperfect competition only by lowering prices.
In fact, in perfect competition, the price remains the same, no matter how many products the firm produces, because its size is negligible in comparison with the total market capacity. Whether the mini-bakery doubles, keeps at the same level or stops baking bread altogether, the general situation on the food market in Russia will not change in any way and the price of bread will remain in value.
On the contrary, the presence of a relationship between production volumes and price levels directly indicates the importance of the firm on the scale of the market. If, say, AvtoVAZ cuts the supply of Zhiguli by half, there will be a shortage of cars and prices will jump. And this is the case with all varieties of imperfect competition.
With perfect competition, the firm cannot overcharge, otherwise the goods will not be bought from it, but from competitors. Because of this, there is no incentive to artificially reduce the volume of production. On the contrary, the greater the output, the greater the firm's revenues. With imperfect competition, the company is significant on the scale of the market. Should she reduce production, the prices of her goods will rise. Thus, incentives are created to understate the volume of output.
Imperfect competition is a market situation when at least one condition of perfect competition is not met.
In an imperfectly competitive environment, the seller is able to manipulate the price and volume of production in order to maximize profits.
In theory, various types of markets with imperfect competition are distinguished: monopolistic competition, oligopoly, monopoly, which will be discussed in the next chapter.
1.3.2. Price and non-price competition
Competition is an element of the market mechanism, the economic rivalry of market actors for market share and profits, receiving orders and ensuring sales. Allocate price and non-price competition.
Price competition involves selling goods or offering services at prices lower than those of competitors.
Price competition dates back to those distant days of free market rivalry, when even similar goods were offered on the market at a wide variety of prices. Reducing the price was the basis by which the trader distinguished his product, drawing attention to it and, ultimately, winning the desired market share.
When markets are monopolized, separated from each other by a small number of large firms that have seized key positions, manufacturers strive to keep prices constant as long as possible in order to purposefully reduce costs and marketing costs, to ensure an increase in profits. In monopolized markets, prices lose elasticity. Once the equilibrium is established, a new attempt to lower the price leads to the fact that competitors react in the same way. The positions of firms in the market do not change, but the profit rate falls, financial condition firms in most cases deteriorates. That is why in our days there is often not a decrease in prices with the development of scientific and technical progress, but their increase: the increase in prices is often inadequate to the improvement in the consumer properties of goods, which cannot be denied.
Price competition involves selling goods or offering services at lower prices than competitors. In a developed market economy, a decrease in prices can occur either due to a decrease in production costs, or due to a decrease in profits. Small firms can only reduce the price for a very short time for competitive purposes. Large companies can completely abandon profits for a long time in order to squeeze competitors out of the market. In the future, they can significantly increase the price and compensate for the losses incurred. A decrease in prices in conditions of price competition usually occurs without a decrease in product quality and a change in the range of goods.
Price competition is used mainly by outsider firms in the fight against monopolies. Besides, price methods are used to penetrate markets with new products (this is not neglected by monopolies where they do not have an absolute advantage), as well as to strengthen their positions in the event of a sudden aggravation of the sales problem.
Methods of price competition include:
- competition between firms selling one product, which are trying by selling the product at the lowest price to crowd out the rest of the sellers and ensure the greatest sales. This competition lowers the price of the offered goods;
2) competition between buyers of the same industry, which leads to an increase in prices for the goods offered. The seller increases his price based on calculations showing the losses that the buyer may incur as a result of not meeting the need;
3) competition between buyers and sellers: buyers prefer to buy goods at a cheaper price, sellers want to sell them at a higher price. The outcome of this competitive struggle largely depends on the balance of power of the competing parties;
4) cross-industry competition, i.e. competition of industries producing substitute goods (analogs, substitutes). The development of such competition can cause both a decrease and an increase in prices in the market. The regulating element in this case is the price of the substitute product.
Allocate direct and hidden price competition. In the face of direct price competition, the company openly announces the decline in prices for goods and services. For example, in 1982, Data General lowered the price of one of its storage devices by 68%, Perkin Elmers by 61%, Hewlett Packcord by 37.5%, as a result of which the average price level fell from $ 20 (early 1981) to $ 5 (mid 1882). With hidden price competition, the firm improves the properties of its products, but increases the price by a disproportionately small amount of improvements. So, "Krate Reseng" released in 1976 a computer with a productivity of 1 million operations / sec and a price of 8.5 million dollars, and in 1982 - a computer, the performance of which is 3 times higher, and the price increased by only 15%. The main condition for conducting a successful competitive struggle with the help of prices is continuous improvement of production and cost reduction. Only the one who has a real chance of reducing production costs wins.
Non-price competition is usually understood as a set of actions by which entrepreneurial firms seek to increase their competitive advantages without resorting to price variations. Non-price competition is carried out mainly by improving the quality of products and the conditions for their sale. Non-price competition through the marketing of products has been called competition on terms of sale. This type of competition is based on improving customer service. This includes influencing the consumer through advertising, improving trade, establishing benefits for customer service after purchasing the product, i.e. during its operation.
Advertising has always been the strongest instrument of non-price competition; today its role has increased many times over. With the help of advertising, firms not only convey to buyers information about the consumer properties of their goods, but also build confidence in their product, price, and sales policies, seeking to create an image of the firm as a “good citizen” of the country in which the entrepreneur acts in foreign trade. ...
Non-price methods include the provision of a large range of services (including personnel training), free after-sales service, offsetting the old delivered goods as a down payment for a new one, and supplying equipment on the terms " finished products into your hands. "
The reasons for the emergence of non-price competition: a high degree of satisfaction of simple and most urgent needs; growth in income levels; expansion of the market volume.
It is important that the product offering is unique from the consumer's point of view. This can be facilitated by the high quality of the product. The higher the quality of the product, the more freedom the firm has in pricing, the range of competition instruments is wide enough.
Currently, various kinds of marketing research have been very much developed, the purpose of which is to study consumer requests, his attitude to certain goods.
In conditions of non-price competition, the manufacturer usually takes into account such factors as the environmental friendliness of the product, safety for consumption. Trademarks and marks can be used as instruments of non-price competition. IN modern conditions non-price competition is much more important than price competition.
Chapter 2. Imperfect competition: forms of competition
in the conditions of monopoly production.
Depending on the ratio between the number of producers and the number of consumers, the following types of competitive structures are distinguished:
1. Pure competition is a situation when there are a large number of independent producers of some homogeneous product on the market and a mass of isolated consumers of this product. Pure, or free, competition is also commonly called perfect competition, and the other three types are called imperfect competition.
2. A huge number of isolated consumers and a small number of producers, each of which can satisfy a significant share of total demand. This structure is called oligopoly, and gives rise to the so-called imperfect competition.
3. The limiting case is monopoly... In this case, the mass of consumers is opposed by a single producer capable of satisfying the total demand of all consumers. When the market is represented by a relatively large number of manufacturers offering heterogeneous (heterogeneous) products, then they talk about.
4. There is also pure monopoly... In this case, there is only one manufacturer of the product and many consumers on the market.
Let's consider in more detail the main of the above market structures.
2.1. Free (pure) competition
Pure competition is a market situation in which numerous, independently operating producers sell identical (standardized) products, and none of them is able to control the market price.
Such an identical or standardized product can be, for example, wheat, corn, sugar, company stock. This means that all sellers of such products offer almost the same product; there is no difference in consumer properties. Therefore, the buyer should not bother to find out the differences in quality, properties - they actually do not exist. And for the seller it becomes practically pointless to conduct non-price competition. At the same time, each of the sellers is not in a position to influence the price of the goods in the market. This is due to the fact that the share of any seller in the total volume of products offered on the market is very insignificant. Let's highlight the main characteristics of pure competition:
a) the large number of participants in the exchange - sellers and buyers;
b) identical, standardized products. This requirement can only be met by simple goods, examples of which were previously named;
c) free access to the markets of new sellers and the possibility of the same free exit from them. d) the availability of complete information from the participants in the exchange. Buyers should have information about available sellers, their prices, and other conditions of sale.
These conditions are in most cases difficult to achieve today. Therefore, pure, or perfect, competition is a rare type of competition in the modern economy. Forms of imperfect competition prevail, where sellers have some control over the market price.
2.2. Oligopoly
Oligopoly- this is a market structure in which not very many sellers are involved in the sale of any product, and the emergence of new sellers is difficult or impossible.
Typically, oligopolistic markets operate from two to ten firms, which account for half or more of total product sales. In oligopolistic markets, at least some firms can influence the price due to their large shares of the total output. Sellers in oligopolistic markets know that when they or their rivals change prices or the quantity produced, the consequences will affect the profits of all firms in the market. Sellers recognize their interdependence.
The reason for the existence of oligopolies: cost savings, barriers to entry and merger.
The oligopoly's actions include trying to control prices, advertising products, and setting the amount of output. The small number of competitors forces them to reckon with each other's reactions to their decisions. In many cases, oligopolies are protected by barriers to market entry similar to those imposed by monopoly firms.
Oligopolistic markets have the following features in common.
1. Only a few companies operate on the market. The product they produce can be either standardized or differentiated.
2. Some firms in the oligopolistic industry have large market shares, so some firms in the market have the ability to influence the price of a product by varying its availability in the market.
3. Firms in the industry recognize their interdependence. Sellers always take into account the reactions of their competitors when setting prices, targeting sales volumes, ad spending, or taking other business measures.
The main characteristics of oligopolistic competition include:
a) few competitors. Each of them usually has a fairly large market share of some product or service;
b) offering standardized or differentiated goods. A number of industrial products, such as steel, aluminum, cement, are standardized products and are usually offered in an oligopolistic competition. Differentiated goods in oligopolistic markets can be, for example, cars, computers, refrigerators, vacuum cleaners, telephones. Oligopolistic enterprises are usually large-scale structures that carry out large-scale production;
c) the complexity of new enterprises entering the industry. Here, potential competitors, potential candidates for entry into the industry are facing very serious problems. This is the formation of a large start-up money capital, and technological difficulties, and the availability of the most important raw materials, and the great opportunities of "veterans" in various ways to prevent the emergence of "newcomers" in the industry, and more. It is really difficult for new firms to break through here;
d) the presence of incentives for mergers, collusion aimed at reducing or eliminating competition. The merger of competitors allows you to get a large market share, to a greater extent use economies of scale: both "at the exit" - when selling your products (this can be done with lower unit costs), and "at the entrance" - when solving problems, resource provision (purchase large consignments of resources at low prices). Collusion - on prices, places of sale, sales volumes - is possible here because the number of competitors is limited and they are all "in sight", which creates fertile ground for such aspirations.
By the type of product, a distinction is usually made between pure oligopoly and differentiated (by products) oligopoly. Pure oligopoly - producing a homogeneous product. In this case, the price of the product on the market is approximately the same. An example of such a market is the market for cement, chemical products, steel, etc.
An oligopoly that produces a variety of products of one functional purpose is differentiated. The prices of goods in such a market are usually distributed according to price clusters - groups of prices for similar but heterogeneous goods. For example, price groups for cars of different classes.
2.3. Monopoly
The origin of the name of this type of imperfect competition is associated with the real circumstance that many sellers, offering similar products, strive, at the same time, to give them unique, special properties. These differences can be both real and imaginary.
Monopolistic competition is a market situation in which numerous sellers sell similar goods in an effort to give them real or perceived unique qualities.
Market monopolistic competition consists of many buyers and sellers who make transactions not at a single market price, but in a wide range of prices. The price range is due to the ability of sellers to offer buyers different product options. Sellers compete by offering a differentiated product in a market where new sellers can enter. Real products may differ from each other in quality, properties, external design, but these differences, if any, are very insignificant. Differences may lie in the services associated with the product. Buyers see the difference in offers and are willing to pay differently for products. To stand out in something other than prices, sellers strive to develop different offers for different market segments and widely use the practice of assigning brand names to goods, advertising, and personal sale methods.
The main characteristics of monopolistic competition include:
a) a relatively large number of small producers;
b) the sale of similar but not identical products. Different manufacturers are engaged in the creation of varieties of goods that satisfy, in principle, the same need. But their products cannot be called identical. Product differentiation is observed here;
c) the individual producer has very limited control over the market price. This is due, firstly, to the fact that there are a lot of manufacturers, which means that the share of the offered goods per one is relatively small. Secondly, the demand for such products is characterized by a rather high degree of elasticity: buyers are sensitive to price changes, and if it rises, they can switch to purchasing similar products from other sellers, ignoring some peculiarities in the properties of goods.
d) various agreements between competitors to restrict competition, for example, to pursue an agreed pricing policy, are practically impracticable. The point is that there are quite a few competitors, and, moreover, the very boundaries of the field of competition and the composition of its participants are blurred and undefined;
e) there are still opportunities for relatively easy entry of new manufacturers into the industry. The scale of the start-up capital and the level of technological complexity do not pose insurmountable barriers to the entry of new competitors into the industry.
In the market of monopoly competition, each firm produces its own product, and all together - products of the same product group. The product produced by each firm differs somewhat from the product of the same group produced by other firms. These are, as a rule, goods (or services) of one purpose - soft drinks, medicines, gasoline of different brands, etc. The products of the group are close substitutes, but differ from one another in quality of workmanship, packaging, design, trademark, after-sales service, etc. And they hardly differ in price. Each firm is the only manufacturer of its goods and, in this sense, a monopolist.
The presence of a large number of manufacturers means that each firm has a small market share and very limited control over the market price. In addition, collusion of firms with the aim of limiting production and artificially raising prices is practically ruled out.
Product differentiation under monopolistic competition can take a number of different forms:
- Product quality... "Real differences" including functional features, materials, design and quality of work, are extremely important aspects of differentiation. For example, in any city there are many eateries. In one of them, when preparing hamburgers, more attention is paid to the aroma of the buns themselves, in the other - to the quality of the chopped cutlets themselves.
- Services. Services and conditions - important aspects product differentiation. The courtesy and helpfulness of the store employees, the firm's reputation for serving customers or exchanging its products, and the availability of credit are service-related aspects of product differentiation.
- Products can be differentiated based on placement and availability. Thus, a gas station located on one of the main highways of the country can sell gasoline at a higher price than one located 2-3 km from the highway.
- Product differentiation can be created through advertising, packaging, trademark use and trademark. When a brand of jeans or perfume is associated with the name of a celebrity, it can affect the level of demand.
From the description of product differentiation, it follows that in conditions of monopolistic competition, price competition is accompanied by non-price competition.
It is relatively easy to enter an industry with monopolistic competition. Some difficulty can be created by the need to obtain a product different from the product of a competitor, and the need for advertising.
2.4. Pure monopoly
A pure, or absolute, monopoly is a market situation in which there is only one seller of a product who has no close substitutes. The absence of close substitutes means that the buyer has a choice not between the goods, but between whether to buy this product or refuse to satisfy the need for it altogether. The seller is one, in which case he is the king and the buyer is the servant. Such a salesperson has tremendous power. With a pure monopoly, there is no competition at all.
Monopoly arises when, for various reasons, there is a single producer on the market for a product - a monopolist who is able to satisfy the general demand of the entire mass of consumers of a given product. It follows that the product of a monopoly is unique in the sense that there are no good or close substitutes. The buyer must buy the product from the monopolist or do without it. The absence of close substitutes for a monopolized product is important from an advertising point of view. Depending on the type of product or service intended, the firm may or may not engage in extensive advertising and sales promotion activities. For example, a pure monopolist selling luxury goods might advertise widely in order to increase demand for its product. Perhaps then more people will want to buy them, abandoning another product. At the same time, the telephone company, which is the only one in a small town, does not need to advertise its services, since people have an idea about them and know from whom they should purchase them.
If the pure monopolists of a number of public utilities are engaged in advertising, then the reason for this is probably an increase in prestige, rather than an increase in market share.
Let's note the main characteristics of a pure monopoly:
a) the only seller;
b) there is no product differentiation,
c) the seller has almost complete control over prices.
d) very difficult conditions for new enterprises to enter the industry.
There are several types of barriers to entry into the industry:
Economies of scale: current technology in some industries is such that efficient low-cost production can only be achieved if producers are extremely large, both in absolute terms and relative to the market. Examples of such industries are the automotive, aluminum industries. If, for example, 3 large firms operate on the entire market and each owns about 1/3 of this market, then it is extremely difficult for new competitors to penetrate this market: small firms are not able to obtain such cost savings as the leading "three" and, hence the amount of profit needed to survive and expand.
Natural Monopolies: Usually these industries are provided by the state with some kind of privilege. But in exchange for this exclusive right, it reserves the right to regulate the actions of such monopolies in order to prevent abuse of the monopoly power that it has granted. Examples of natural monopolies are the so-called public utility companies - electricity and gas companies, bus companies, water supply and communications companies.
The state can also grant patents and licenses, creating legal barriers to entry into the industry. Giving out patents the state seeks to protect the inventor from unlawful seizure of the product or technological process by competing firms that did not participate in the time, effort and money that went into its development. The profits secured by one important patent can be used to fund the research and development work required to develop patentable products. The monopoly power gained from patents may well be amplified. Entry into the industry may be restricted by the state by issuing licenses... For example, licenses for radio and television stations, educational institutions.
Pure monopoly is an abstraction. There are very few products that have no substitutes.
It is rare that there is only one seller in a national or global market. Pure monopoly is more common in local markets than in national ones.
The following types of monopolies can be distinguished:
Natural monopoly - monopoly in this case is due to the fact that over long periods of time, the average costs in the industry will be minimal if one rather than several competing firms operates in it;
Accidental monopoly - arises as a result of a temporary excess of demand over the supply of a given product. Is temporary;
Artificial monopoly - arises as a result of restrictions on the release of this type of product by the state.
Chapter 3. The role of competition in the development of a market economy.
The role of competition in the economic life of society is deep and multifaceted. Contributing to the growth of the most efficient production and washing out ineffective economic links, competition acts as a mechanism for regulating economic proportions. It manifests itself as a way of orienting entrepreneurs to improve the efficiency of management.
Competition is a special way of interaction between market actors. From the point of view of the individual entrepreneur, competition is the process of firms competing for limited effective demand. In fact, the competitive relations of firms go far beyond the boundaries of individual market segments, even industries, are a form of struggle for better economic conditions. It is this aspect of competition that will reveal its significance and role in the development of the economy.
The economic nature of competition is associated with splitting economic power... This means that the very existence of competition, on the one hand, indicates the possibility of securing a certain economic freedom for business entities, and on the other hand, which is especially important, to the dispersal of economic power among the aspects of the market, which allows them to exercise free choice. Therefore, the role of competition is exhausted only by limited influences, and at the same time serves as a breeding ground for entrepreneurial structures.
Secondly, by providing equal principles of competition, it counteracts the absolute dominance of any of the advantages of firms, initially stipulating the existence of the most varied types and forms of them. Large enterprises benefit from economic power and scale of production. Small ones, on the other hand, compensate for their economic weakness with entrepreneurial flexibility. While specialist firms benefit from their adaptability, innovator firms benefit from pioneering advantages. The absence of absolute advantages makes their existence inevitable. It should be borne in mind that, if competition as such, in principle, presupposes the existence of different in scale and form of organization of entrepreneurial structures, then their real diversity in the economy depends on the degree of its rigidity.
Finally, competition is a condition for market activity. Setting performance criteria and guiding the market towards search better conditions management, competition determines the need for continuous improvement of forms and methods of management, becoming a "perpetual motion machine" of the development of the market function itself. Not so much quality improvement and cost reduction, but also the search for new markets, the creation of new goods and services; applying new business methods is becoming a daily concern of competitors.
The actual practice of economic life in the world shows that the market is more powerful and effective than any other factor in its movement. The efficiency of the market functioning is the higher, the more active the competition and the better the conditions for its manifestation. Competition requires a certain, preferably optimal combination of economic, technological and social prerequisites. Violation of this condition complicates the manifestation of competition. The result is a stagnation in the economy, a decrease in its efficiency, a possible drop in the living standards of the country's population.
Competition is at the heart of the modern market mechanism, not only because the scale of its manifestation has grown immeasurably over the past decades. The main thing is that competition is an organic property of the market, its integral feature. The absence of '' normal '' competition, its destructive or, on the contrary, weak manifestation is a clear indicator of an obvious trouble in the market. For example, '' a scarce market '' eliminates or minimizes competition between producers for buyers, while at the same time encouraging competition between buyers for goods.
Market competition in our economy was eliminated with the elimination of private property. Total governmentalization in the Soviet period led to the disappearance of the market and commodity production, the elimination of one of the initial conditions for the emergence of competition - the isolation of free producers as owners of the means of production and the produced product.
What is needed in our country for the normal functioning of a market economy? First of all, a favorable competitive environment. The competitive environment can be defined as a historically specific socio-economic structure of social production, special type socio-economic relations between subjects and objects. It provides commodity-money exchange, organized according to the laws of commodity production.
Basically, the competitive environment operates in accordance with strictly calculated target programs. The presence of such an environment is characteristic of a market economy, a special phase in the development of social production. The competitive environment is preceded by the formation of competition as such, i.e. forms of relationships between business entities in the process of realizing their individual interests. In its absence, practically any commodity producer, even if it does not occupy a dominant position in the market, has monopoly power, the ability to dictate its terms to consumers.
A special type of monopoly economy has developed in our country, which has no analogues in the world. The reasons for its appearance were:
1) elimination of market conditions of management due to ignorance of the laws of commodity production.
2) curtailment of commodity-money relations
3) elimination of competition
4) artificial concentration and narrow specialization of production
5) the predominance of centralism and bureaucracy in economic management, etc.
Our economy is unique: not only production is monopolized in it, but also the habitat of economic entities. The state acts simultaneously both as a monopoly producer and as a monopoly governing principle. Non-state economic entities are embedded in a monopoly habitat, created by them.
So, the increased role of competition in modern economic system is as follows:
1) competition ensures an equal position of participants in economic relations - sellers and buyers. Equality is created and maintained by freedom of choice: the buyer has the opportunity to choose a certain counterparty from several or many sellers of some products he needs, and the seller has the same opportunity to voluntarily decide on the geographical location, time and conditions of the offer of his goods. If, for example, you are not satisfied with the quality of showing films, the repertoire in a certain cinema, you can "punish" this enterprise by refusing to visit it, become a regular customer of another cinema, now giving it your monetary votes. If many moviegoers do as you do, then a failed movie theater will find itself in a rather difficult position. Thus, competition turns out to be an influential tool for influencing one side of the exchange on the other.
2) competition creates one of the main conditions necessary for the effective performance of coordinating functions at a cost. Free pricing is the main element of the market mechanism, which means that it can be argued that competition is a condition for the viability of the entire market system. Only in a competitive environment can the market effectively perform the functions of allocating resources and final goods. The market as a self-regulating system is effective only when there is competition.
3) competition acts as a control system for the effectiveness of private entrepreneurship. Competition tests business for its relevance to the public interest. Not all enterprises withstand this test, as a result of competition there is a continuous rejection of ineffective structures, that is, a certain part of economic entities is forced to leave the "field of the economic game."
4) competition creates an interest in improving economic resources, their production combinations, reducing costs per unit of output, scientific and technical renewal of production. For example, the money income of many people is associated with the proposal of such economic resource as labor ability. The attraction of this or that employee, the price of labor services - wages - in a competitive environment depends on the quality of labor abilities. As a rule, a higher competitive position of an employee brings him more cash income. This means that a sane person cannot but care about the quality of his resource - labor.
Thus, competition is the basis of a market economy, a powerful incentive economic growth, improving product quality, accelerating scientific and technological progress and reducing production costs and prices.
CONCLUSION
As a result of our analysis, we found out that competition is economic process interactions, interconnections and struggles between companies entering the market in order to provide better marketing opportunities for products, meeting the diverse needs of customers.
The consequence of competition is, on the one hand, the aggravation of production and market relations, and on the other, an increase in scientific and technological progress.
According to the state of the market, competition is divided into perfect, imperfect and regulated.
In economics, it is customary to divide competition based on its methods into price and non-price, or competition based on price and competition based on quality.
There are four possible competitive structures that define market structures: pure competition, monopoly competition, oligopoly, pure monopoly.
Each of which is characterized by a number of features:
Pure competition- many small firms; uniformity of products; no difficulty in entering and exiting (from the industry); equal access to all types of information.
Monopolistic competition - many small firms ; heterogeneity of products ; no difficulty in entering and exiting (from the industry); somewhat limited access to information;
Oligopoly - a small number of large firms; heterogeneity (or uniformity) of products; possible difficulty in leaving (from the industry); somewhat limited access to information;
Pure monopoly - by the presence of one firm; uniqueness of products; an insurmountable barrier to entry; somewhat limited access to information;
Competition is a necessary and defining condition for the normal functioning of a market economy. But like any phenomenon, it has its pros and cons:
1) it contributes to the development of scientific and technological progress, constantly forcing the commodity producer to apply the best technologies, rationally use resources. In the course of it, economically inefficient production facilities, outdated equipment, and low-quality goods are washed out;
2) it is sensitive to changes in demand, leads to a reduction in the cost of production, slows down the growth of prices, and in some cases to their decrease;
3) to a certain extent equalizes the rate of return on capital and the level wages in all sectors of the national economy.
The negative aspects include:
1) gives the business a certain instability, creates conditions for unemployment, inflation and bankruptcy;
2) leads to income differentiation and creates conditions for their unfair distribution;
3) its consequence may be an overproduction of goods and not an overload of capacities during periods of production downturns.
The main conditions for the emergence of competition are:
1) ownership of the means of production, product and income
2) access to resources and information
3) a plurality of separate producers, economic independence (choice of the type of activity, organizational forms, determination of funding sources, methods and structures of production management, sales, etc.)
Market competition is a system of relations between economically independent producers (sellers) of goods and services seeking to find new ways to realize their economic interests. The conditions for its development, along with the indicated ones, are: the subjects' interest in the growth of profits, stimulation of the creation of new enterprises in monopolized industries, etc.
Bibliography
- Yudanov A.Yu. “Competition: theory and practice”. M., 1996.
- 1. Balikoev V.Z. General economic theory Novosibirsk, Lada, 2000
- Zhuravleva G.P. "Economics: textbook". - M .: Jurist, 2001.
- Michael Porter: "Competition" M .: Yurayt, 1999
5. Porter M. Competition M., Williams, 2000
- Kamaev V.D. and a team of authors. A textbook on the basics of economic theory. - M .: "VLADOS", 1995. - 384p.
- Robinson. J. Economic theory of imperfect competition. M. 1986
- Antonova LV, Lipsits IV, Lyubimov LL .. Revealing the secrets of the economy. - M .: "Vita-Press", 1994. - 320s.
- Seidel. X, Temmen.R Fundamentals of the doctrine of economics. M .: Delo LTD. 1994
Annex 1
Table P.1.1
Approaches to the definition of the term "competition"
Source |
Characteristic |
Typical definitions of the term "competition" |
|
Competition as a competitive market |
Domestic literature |
Based on the everyday understanding of competition as rivalry to achieve the best results in any field |
A) Competitiveness of business entities, entrepreneurs, when their independent actions effectively limit the ability of each of them to influence the general conditions for the circulation of goods in a given market and stimulate the production of those goods that are required by the consumer; B) competition in the market in the absence of monopoly; C) adversarial, competitive relations between two or more economic entities of economic activity, manifested in the form of the desire of each of them to bypass the others in achieving common goal, get a higher result, push back the opponent; D) rivalry between participants in the market economy for the best conditions for the production, purchase and sale of goods. |
Competition as an element of the market mechanism that balances supply and demand |
Classical economic theory |
Competition acts as a force that ensures the interaction of supply and demand, balancing market prices. As a result of the rivalry between buyers and sellers, the total price for homogeneous goods and a competitive form of supply and demand curves are established. |
A) A. Smith interpreted competition as a behavioral category, when individual sellers and buyers compete in the market for more profitable sales and purchases, respectively. Competition is the very “invisible hand” of the market that coordinates the activities of its participants; B) Competition is a mechanism for regulating the proportions of social production. |
Competition as a criterion by which the type of industry market is determined |
Modern theory of market morphology |
Competition is understood as a certain property of the market. Depending on the degree of perfection of competition in the market, they distinguish Various types markets, each of which is characterized by a certain behavior of economic agents |
Competition is not rivalry, but rather the degree to which general market conditions depend on the behavior of individual market participants. |
Appendix 2
Table A.2.1
Competition classification
Classification approach |
Competition classifications |
By the degree of product differentiation |
Homogeneous, homogeneous (no differentiation) Diverse, heterogeneous (with differentiation) |
By the degree of free penetration into the industry |
Open Closed Semi-closed |
By the degree of influence on the choice of a particular market by a firm |
Functional (arises because any need can be satisfied different ways... And, accordingly, all products that provide such satisfaction are functional competitors) Specific (due to the fact that there are goods intended for the same purpose for different important parameters) Subjective (the result of the fact that firms produce, in fact, identical goods, differing only in the quality of manufacture, or even the same in quality). |
By the degree of antagonism |
Competition without extremes In violation of the norms current legislation |
As of the market |
Perfect competition Imperfect competition Regulated competition |
By the way of rivalry |
Price competition Non-price competition |
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The essence of competition is the constant search for the best conditions for both the consumer and the seller.
For all participants in market relations, competition is an objectively compulsory phenomenon, but, first of all, it is such for producers of goods and services. The realities of the competitive struggle force enterprises to introduce new production technologies, increase labor productivity, maintain or reduce the cost of products. In other words, competition helps to reduce production costs, save resources, and forces the most efficient combination of the factors of production used.
In conditions of healthy market competition, the activity of any economic entity is subject to double control - internal and external. Indirect external control by competitors is brutal and impartial. The competitiveness of an enterprise is ultimately assessed by the consumer, giving his preference to the goods, services of one or another participant in the competitive struggle.
In economic theory, there is more than one definition of competition.
Classical political economy defines competition as rivalry for profit. also in economic literature competition refers to the relationship of enterprises in the context of comparing the results of their economic activities.
Competition is a complex, multi-valued and multifunctional category. It ensures the normal development, self-regulation and functioning of the market.
Competition functions
Competition in a market economy has the following functions:
- Regulation. To win the competition, the manufacturer must offer goods and services that are in priority demand from the buyer. Production factors under the influence of prices are redistributed in the industries most in need of them.
- Motivation. Producers who offer quality products at the best price, that is, manufactured at the lowest cost, make a profit, which becomes an incentive for technological progress. Enterprises that do not respond to the needs of consumers, violate the rules of competitive rivalry, incur losses and can be completely squeezed out of the market.
- Distribution. Competition not only stimulates productivity gains, but also contributes to a fair distribution of income among its participants, depending on the effective contribution of each.
- The control. Thanks to competition economic impact each business entity is limited. The buyer can choose among several sellers. And if it comes about the price of a product or service, the cleaner (more perfect) market competition, the fairer the final price for the consumer.
Classification
Competition is classified according to various criteria.
By the scale of development
- individual (between specific market participants);
- local (in a certain area);
- industry (within one industry);
- intersectoral (between different sectors of the market);
- national (within one country);
- global (in the world market).
By the nature of development
- price (manifested when artificially reducing prices for services or goods);
- non-price (consists in improving the quality of the product, modernizing production technologies, introducing innovations and manifests itself in attempts to produce a fundamentally new product or improve an existing one).
Depending on the fulfillment of the prerequisites for a competitive balance in the market
- perfect (based on the fulfillment of the prerequisites of a competitive balance and assumes the presence of a large number of independent producers and buyers);
- imperfect (based on a violation of the prerequisites for a competitive balance and involves the division of the market between several producers (oligopoly) or a complete monopoly).
Depending on the needs that a particular product satisfies
- horizontal (rivalry between manufacturers of the same goods);
- vertical (struggle between manufacturers of different goods that satisfy the same needs).
Competition in the economy is a complex and multifaceted concept. It performs many functions: it promotes self-regulation of the market, improves the quality of goods and services, production costs, creating better conditions for both producers and consumers of goods and services.
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