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Imperfect Competition

Definition

Imperfect competition refers to a market structure where there are multiple sellers and buyers, but they have some degree of control over the price and quantity of goods or services. This means that firms can differentiate their products or manipulate prices to gain an advantage.

Analogy

Imagine you're at a school fair with different food stalls. Each stall sells similar items like burgers, but they all have their own unique recipes and prices. Some stalls may offer special toppings or discounts to attract more customers. This is similar to imperfect competition, where each seller has some control over their product and pricing.

Related terms

Monopolistic Competition: In monopolistic competition, there are many sellers offering differentiated products, but there is still some level of competition among them.

Oligopoly: Oligopoly refers to a market structure where only a few large firms dominate the industry and have significant control over prices and output.

Monopoly: A monopoly occurs when there is only one seller in the market, giving them complete control over the price and quantity of goods or services.