Examples
Though there is no actual perfectly competitive market in the real world, a number of approximations exist:
Perhaps the closest thing to a perfectly competitive market would be a large auction of identical goods with all potential buyers and sellers present. By design, a stock exchange resembles this, not as a complete description (for no markets may satisfy all requirements of the model) but as an approximation. The flaw in considering the stock exchange as an example of Perfect Competition is the fact that large institutional investors (e.g. investment banks) may solely influence the market price. This, of course, violates the condition that "no one seller can influence market price".
Horse betting is also quite a close approximation. When placing bets, consumers can just look down the line to see who is offering the best odds, and so no one bookie can offer worse odds than those being offered by the market as a whole, since consumers will just go to another bookie. This makes the bookies price-takers. Furthermore, the product on offer is very homogeneous, with the only differences between individual bets being the pay-off and the horse. Of course, there are not an infinite amount of bookies, and some barriers to entry exist, such as a license and the capital required to set up.
Free software works along lines that approximate perfect competition as well. Anyone is free to enter and leave the market at no cost. All code is freely accessible and modifiable, and individuals are free to behave independently. Free software may be bought or sold at whatever price that the market may allow.
Some believe that one of the prime examples of a perfectly competitive market anywhere in the world is street food in developing countries. This is so since relatively few barriers to entry/exit exist for street vendors. Furthermore, there are often numerous buyers and sellers of a given street food, in addition to consumers/sellers possessing perfect information of the product in question. It is often the case that street vendors may serve a homogenous product, in which little to no variations in the product's nature exist.
Another very near example of perfect competition would be the fish market and the vegetable or fruit vendors who sell at the same place, the bars in "Le Carré" (Liège, Belgium) or the "kebab street" near the Grand Place in Brussels:
- There are large number of buyers and sellers.
- There are no entry or exit barriers.
- There is perfect mobility of the factors, i.e. buyers can easily switch from one seller to the other.
- The products are homogenous.
Read more about this topic: Perfect Competition
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