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Imperfect competition

From Academic Kids

In economic theory, imperfect competition, is the competitive situation in any market where the conditions necessary for perfect competition are not satisfied.

Forms of imperfect competition include:

  • Monopoly, in which there is only one seller of a good.
  • Oligopoly, in which there is a small number of sellers.
  • 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 is a small number of buyers.

There may also be imperfect competition in markets due to buyers or sellers lacking information about prices and the goods being traded.

There may also be imperfect competition due to a time lag in a market. For example, in the 1990s, there was a shortage of computer programmers, but becoming a skilled programmer requires several years of experience. This drove up salaries. Another 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.

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