What is Imperfect Competition or Imperfect Market?
This is a market structure that is characterized by different degrees of imperfections. The most extreme case of imperfect market structure is termed monopoly. The other intermediate cases are oligopoly, monopolistic competition, discriminating monopoly and so forth.
An imperfect market may be defined as any market structure where either the buyers or the sellers can influence the prices of goods and services because they are few in number.
Types of Imperfect Market
Imperfect markets are usually classified into the following: (1) Monopoly (2) Duopoly (3) Oligopoly (4) Monopsony
This market structure exists whenever there is one buyer for a product.
This is a market structure with only two producers or sellers of a product.
This is a, market structure characterized by few sellers or producers.
It is categorized as either collusive oligopoly like OPEC or non-collusive in which case they make no attempt to come together as a group.
Monopoly may be defined as a market situation where there is only one producer or supplier of a particular commodity that has no substitute and who has the power to influence the price of the commodity to his own favour.
The commodity sold by a monopolist is usually differentiated.
Natural Cause: A particular area may enjoy the monopoly of the supply of a particular mineral resource given to the area by nature.
Act Of Parliament: Government may through acts of parliament confer special monopoly in the production and suppiy of certain essential products or services on some organisations, example, public corporations.
To Protect Public Interest: As a result of this, government may embark on monopoly in the supply or production of some commodities.
Merging of Producers: This will make them stronger and put them in a better position to eliminate other competitors.
The Level of Technology: If a firm develops its techniques of production whereby it produces goods at cheaper rate, it may force other competitors out of production.
Advertising: If a firm succeeds through advertising it may force other competitors out of business.
Patent Law: This is a law that gives a fIrm special privilege to protect its new invention and it scares other competitors away.
How to Control Monopolistic Competition
Privatisation: This means shifting of government ownership of public corporations, industries companies etc, to rivate enterprises, thereby inviting individuals to participate in their running.
Reduction Of Tariffs: This will encourage importers to import more goods that will compete with the locally produced ones that enjoy monopoly.
Provision of substitute products.
DIscouraging Merging of Firms: A law shou should be made that will dIscourage merging of firms.
Stopping The Issuance Of Patent Law: This will encourage other people to compete with the inventor thereby, coming up with more of such inventions.