In economic theory, imperfect competition is the competitive situation in any market where the sellers in the market sell different/dissimilar of goods, (haterogenous) that does not meet the conditions of perfect competition.
Forms of imperfect competition include:
- Monopoly, in which there is only one seller of a good.
- Oligopoly, in which there are few sellers of a good.
- Monopolistic competition, in which there are many sellers producing highly differentiated goods.
- Monopsony, in which there is only one buyer of a good.
- Oligopsony, in which there are few buyers of a good.
- Information asymmetry when one competitor has the advantage of more or better information.
There may also be imperfect competition due to a time lag in a market. An example is the “jobless recovery”. There are many growth opportunities available after a recession, but it takes time for employers to react, leading to high unemployment. High unemployment decreases wages, which makes hiring more attractive, but it takes time for new jobs to be created.
Famous quotes containing the words imperfect and/or competition:
“He stood, a soldier, to the last right end,
A perfect patriot and a noble friend,
But most a virtuous son.
All offices were done
By him, so ample, full, and round
In weight in measure, number, sound,
As, though his age imperfect might appear,
His life was of humanity the sphere.”
—Ben Jonson (1572–1637)
“Like many businessmen of genius he learned that free competition was wasteful, monopoly efficient. And so he simply set about achieving that efficient monopoly.”
—Mario Puzo (b. 1920)