Types of Competition

Chapter 7

Perfect Competition

Many sellers – Similar Products– dry cleaners– agriculture

Easy entryNo control over price – – market is controlled by supply and demand

Monopolistic Competition

Large number of sellers- Similar but slightly different products – toothpaste, clothing, cosmeticsRelatively Easy Entry some control over price – can raise prices without loss of customersNon-price competition– product differences– advertising

OligopolyAn industry dominated by a few suppliers that exercise some control over price.– Automobile industry – U.S. big three– cereal companies

Substantial barriers to entry – customer loyalty– excessive capital

Non – price competitionIdentical or slightly different productsLimited control over price- – any company can raise or lower its price but the

other competitors react.

Monopoly

Single sellerNo SubstitutesComplete Control of the Market Price by controlling supplyNo entry for competitionU.S. tries to prevent

Natural Monopoly

Due to high costs it is cost efficient to have only one provider Utilities- gas, electricity etc.