perfect competition

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perfect competition

(ECONOMICS) the IDEAL-TYPE concept of a ‘free market’ in which:
  1. there exist many buyers and many sellers;
  2. units of the commodity are homogeneous;
  3. where any one buyer's purchases do not significantly alter the market price. In addition, the assumption is also made that buyers and sellers possess full information, that there is freedom of entry to the market for new producers. who are able to sell on the same terms as existing producers. The further implication is that no producer is in a position to make ‘excess profits’. Thus perfect competition is often equated with maximum economic efficiency Equally, however, it must not be ignored that the model is an ideal-type one. Thus, although real world conditions will sometimes be found which approximate to the ideal type, often they do not (see MONOPOLY). And there can be no assumption that the achievement of‘free market’ conditions will always produce optimum, efficient and ‘fair’ outcomes for all parties concerned (compare CAPITALIST LABOUR CONTRACT, UNEQUAL EXCHANGE).
Collins Dictionary of Sociology, 3rd ed. © HarperCollins Publishers 2000
References in periodicals archive ?
where [gamma] [epsilon] [0, 1] indexes conduct ranging from price-taking ([gamma] = 0) to pure monopoly in the wholesale market ([gamma] = 1).
The fact that [delta] is identified in the MPT solution means that bilateral price-taking conduct can be empirically distinguished from retailers' exercise of monopsony power in the wholesale market.
It is easy to see that a simple parametric restriction, [delta] = 0, converts the MPT solution to the BPT solution, so one could test a null hypothesis of bilateral price-taking versus an alternative of manufacturer price-taking coupled with a nonzero degree of retailer oligopsony power by testing [delta] = 0 versus [delta] [greater than] 0 using an asymptotically valid t-test procedure based on the results of maximum likelihood estimation of the equations of the MPT equilibrium.
[22] The economic interpretation of this result is that noncompetitive pricing distortions exist in this bilateral oligopoly setting and that they appear to be the result of the exploitation of oligopsony power on the part of retailers while manufacturers exhibit benign, price-taking conduct.
Implicit in the more recent approaches to the measurement of market power is the maintained hypothesis of price-taking behavior on one side of the market or the other.
Maximizing joint profit would require operating where retailers' marginal revenue net of marginal retail cost equals manufacturers' marginal cost: the bilateral price-taking quantity.
Uniqueness of the stable cartel for n [is not equal to] 4 is not a surprising result, given its existence, since [4] has derived unique stable cartels with a price-taking fringe.
An open question is whether the same pattern of preferences characterizes a market with a price-taking fringe.
Again, a question remains whether this result is also true given a price-taking fringe.
A price-taking fringe would produce a quantity such that price equals marginal cost.
This point is due to Jeff Daskin and contrasts with Rothschild's discussion of entry with a price-taking fringe [17].