What Does Imperfect Competition Mean?
Imperfect competition occurs when individual sellers have some degree of control over the price of a product in a particular industry. In contrast, perfect competition refers to a market structure where numerous buyers and sellers trade homogeneous products, with no single buyer or seller able to influence market prices, and complete transparency of market information—though this is an idealized model.
Imperfect competition can be further categorized into:
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Monopoly: A single seller dominates the market with no close substitutes, allowing the monopolist to set prices freely (e.g., a pharmaceutical company holding exclusive patents).
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Oligopoly: A few dominant sellers offer similar or substitutable products (e.g., major global automotive companies).
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Monopolistic Competition: Many sellers offer differentiated products (e.g., PC manufacturers producing low-, mid-, and high-end configurations).
Impacts of Imperfect Competition:
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Monopolists can aggressively set strategies to extract high profits.
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Reduced competition may stifle innovation.
