Competitive Markets

Competitive Markets

1. These are markets in which so many consumers, offers and brands interact that none of them is capable of influencing the price of products on its own. Competition is always the order of the day and goods and services are generally the same or similar.

2. Competition refers to the existence of a large number of companies or people who offer and sell a product (they are bidders) in a given market, in which there are also people or companies, called consumers or applicants, which, according to their preferences and needs, they buy or demand these products from the suppliers. In some cases the competition is presented with different intensity and at different levels, which make a different classification system appear. This classification also depends on the amount of control that suppliers and consumers may have over prices, the variety of goods found in the market, and the ease with which new suppliers enter the market.

3. TYPES OF COMPETITION

   • Imperfect competition
     • Is closer to reality than the notion of perfect competition.
       • The monopoly
         • This is the case in which, for a specific product, good or service, there is only one person or company (monopolist) that produces it. It should be noted that this good or service has no substitute; that is to say, no other for which it can be replaced without any inconvenience [1] , therefore, this product is the only alternative that the consumer has to buy. In this case, the producer has great influence and control over the price of the good, since it contributes and controls the total amount offered on the market, thus becoming a "price maker". The monopolist does not have close competition, since there are barriers to entry for other producers of the same product. These barriers can be of different types (legal, technological, or other barriers), and become obstacles that potential new producers cannot cross.
           • Hoy en día, muchos países tienen leyes antimonopolio. Los monopolios, por el gran control que tienen las empresas o productores, pueden prestarse para que cometan grandes abusos contra los consumidores; Asimismo, traen grandes problemas para el avance tecnológico de los países, ya que, al tener pleno control en el mercado, no tienen ningún incentivo para mejorar su forma de producción e incorporar tecnología, que es la que se obtiene a través de la competencia [ dos]. Con este tipo de leyes, los gobiernos buscan incentivar la competencia y, de esta forma, lograr que el consumidor pueda acceder a más y mejores productos a precios más razonables.
       • Monopolistic competition
         • In this type of competition, there is a significant number of producers acting in the market without there being a dominant control by any of them in particular.
           • La cuestión clave aquí es que la diferenciación del producto está presente; es decir, un producto en particular, dependiendo del productor, puede tener variaciones que permitan diferenciarlo en algún aspecto de otros productos similares elaborados por otras empresas.
           • The competition, then, will not be based on prices but, for example, on the quality of the product, the service during the sale or after the sale, the location and access to the product, advertising and packaging, etc. Another noteworthy feature of monopolistic competition is the easy entry and exit of the industry by producers. A large number of producers of a given good means that companies do not need large amounts of money, or a large size, to compete; costs, however, can be increased by the need to seek to differentiate themselves from other competitors.
             • Un ejemplo de este tipo de competencia puede ser el mercado de ropa de mujer. Los productores, aunque se dedican a producir ropa de mujer, no elaboran vestidos iguales a los de los demás, ya que los productos de uno u otro son diferentes en cuanto a calidad, diseño, servicio de venta, etc., haciendo cada producto diferente . de otro sin dejar de ser ropa de mujer.
       • Oligopoly
         • Occurs when there is a small number of companies in the same sector, which dominate and have control over the market. These companies can produce the same goods or services (such as products such as steel, cement, industrial alcohol, which are physically the same and difficult to differentiate) or goods or services that are differentiated by some particular aspect, as is the case of products such as breakfast cereals, detergents or some household appliances.
           • One of the most common entry barriers imposed by the oligopoly is the amount of money needed to enter that select group of producers that exist in the market. Given the existence of such powerful producers in the market, a new producer who wants to enter it would need a very large amount of money that would allow him to compete without being eliminated early.
   • Perfect competition
     • SItuation in which the number of people or companies that offer and demand a certain product is so great that it can be considered infinite; likewise, there are no barriers to the entry of new bidders of the same product and in this way no bidder or demander has control over the market or the price at which the product is negotiated, since the amount that each one contributes to the total quantity of the negotiated product is so insignificant that it becomes impossible to have control over the price and quantity of the negotiated product. In this case, both producers and consumers would be "price takers" because they accept and negotiate with the prices that appear in the market for the different goods. We would then have a perfectly competitive market, which appears more as a theoretical development than as a real situation.

4. Monopsony

   • Appears when there is only one buyer in a market. This, being unique, has a special control over the price of the products, since the producers have to adapt in some way to the buyer's demands in terms of price and quantity. This allows the buyer to obtain the products at a lower price than they would have to buy if they were in a competitive market.

5. Oligopsony

   • In this market, there is not a single consumer, but rather a small number of consumers in whom control and power over the prices and quantities of a product in the market are deposited. Therefore, the benefits would be concentrated on the consumers, but not on the producers, who see their situation worsen by not receiving a reasonable price for the products they produce. Examples of oligopsony are more frequent than those of pure monopsony. An example may be automobile manufacturers in a country like Japan.