MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION

FEDERAL STATE EDUCATIONAL INSTITUTION

HIGHER PROFESSIONAL EDUCATION

"ACADEMY OF BUDGET AND TREASURY OF THE MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION"

OMSK BRANCH

COURSE WORK

BY DISCIPLINE:

Economic theory

Student(s) ) Borisova Elena

Group No. 1У1 Course No. 1

Subject: Competition, its types and role in economic development

Faculty financial and accounting

Speciality accounting, analysis and audit

Scientific director Korneenkova Tatyana Pavlovna

___________________ ____________________ ___________________

Date of receipt Admission to defense Protection of work

work in the dean's office Teacher's signature Evaluation

Teacher's signature

Omsk - 200 9 /20010 academic year

Work plan:

Chapter 1. The essence of competition, the conditions of its existence and functions.

Chapter 2. Types of competition

2.1. Perfect and imperfect competition

2.2. Price and non-price competition

Chapter 3. Imperfect competition: a form of competition in conditions of monopolistic production

3.1. Pure competition

3.2. Oligopoly

3.3. Monopoly

3.4. Pure monopoly

Chapter 4. The role of competition in the development of a market economy.

Conclusion

Bibliography

Introduction

The main feature of a market economy is freedom of choice: the manufacturer is free to choose the products produced, the consumer is free to purchase goods, the employee is free to choose a place of work, etc. But freedom of choice does not automatically ensure economic success. It is won through competition.
Competition is a key category of market relations. It comes in various forms and is carried out in different ways.
As evidenced by general and special encyclopedic dictionaries and reference books, competition (from the Latin concurerre - to collide) is the rivalry between participants in a market economy for the best conditions for the production, purchase and sale of goods.
This term is ancient, as is the phenomenon itself defined by this term. The deep roots of the term “competition” lie in the need to constantly wage a struggle for existence, for relatively better living conditions, the extreme form of which can be considered the struggle for survival.
Competition occupies a dominant position in the economy of any state, but has a variety of forms. The importance of competition in the economy of any country is also determined by the level of economic development of the country, its position and influence in the international environment of market relations.

With Russia's transition to market economic methods, the role of competition in the economic life of society has increased significantly.

The fiercer the competition in the domestic market, the better prepared national firms are to compete for markets abroad, and the more advantageous the situation for consumers in the domestic market both in terms of prices and product quality. After all, competitive products must also have consumer properties that would distinguish them favorably from similar products of other competitors.

Competition is the core of the modern market mechanism not only because the scale of its manifestation has increased immeasurably over recent decades. The more active the competition and the better the conditions for its manifestation, the higher the efficiency of the market. Competition requires an optimal combination of economic, technological and legal prerequisites. Underestimation of this condition prevents the existence of competition or even nullifies it. The result is stagnation in the economy, a relative or absolute decrease in its efficiency, and a possible decrease in the living standards of the country's population.

In this regard, the study of competition and maintaining a competitive environment in the Russian Federation, as in all developed countries at present, has become an important task of state regulation of the economy.

Thus, the purpose of this work is to consider competition from different sides, to determine its functions in the economy, its main types, as well as its conditions of existence and role in a market economy. When considering the types of competition by type of market structures, much attention is paid to imperfect competition, its types, characteristics, advantages and disadvantages, since this form of competition is now the most widespread. The work also touches on the issue of competition in Russia. In Russia, over the years of economic transformation, a special system of economic management has developed, incomprehensible to the whole world. In accordance with this, the actions of competitive laws are chaotic and have their own special forms.

Chapter 1. Theoretical aspects of the concept of “competition”

The concept of competition is fundamental in the economic theory of market relations. Competition manifests itself at all levels of the capitalist economy - from the micro level (firm) to the global economic system. Even the creators of socialism, condemning some forms of competition, tried to introduce it into the socialist economy, calling it “socialist competition.”

The economic success (and often survival) of a subject of a market economy primarily depends on how well he has studied the laws of competition, its manifestations and forms, and how ready he is for competition.

The topic of competition is also reflected in the annual message of the President of the Russian Federation D.A. Medvedev. Federal Assembly of the Russian Federation, which he addressed on March 30 this year. The President noted: “The main point of the country’s development, the main idea of ​​our entry into the 21st century should be to increase the competitiveness of the Russian economy. All actions of the President, the Federal Assembly, the Government, every ministry and department, every politician should be assessed not from the point of view of compliance with liberal or anti-liberal views, but according to a single criterion - whether these actions contribute to strengthening or weakening the country’s competitiveness.”

Competition is actually of great importance in the economic life of society. In this regard, this term should be subject to careful study both at the firm level and within the entire country.

This chapter will examine the reflection of competition in economic science, the interpretation of the term “competition” by various theoretical schools, the essence, types, main functions and conditions for the existence of competition.

1. Evolution of approaches to the study of competition in economic science.

Competition - translated from Latin means “to collide”. In its most general form, competition is the rivalry between participants in a market economy for the best conditions for the production, purchase or sale of goods. Competition is an economic law of a market economy. It occurs between sellers and buyers, among sellers and among buyers.

The interpretation of the concept of competition in economic science has gone through several stages. Competition, as an economic phenomenon, appeared during the establishment of trade relations and acquired its usefulness with the advent of free market relations. At the same time, the most comprehensive theoretical provisions about the driving forces of competition appeared. And the main merit in this is classical political economy, and its main representative A. Smith. He viewed competition as a matter of course, permeating all sectors of the economy and limited only by subjective reasons.

Classical economic theory was characterized behavioral approach. In particular, A. Smith understood the essence of competition as a set of mutually independent attempts by various sellers to establish control in the market. Consequently, the emphasis was on the behavior of sellers and buyers, which was characterized by honest, non-collusion competition for more favorable terms for the sale or purchase of goods. At the same time, prices were considered the main object of competition.

A. Smith identified competition with the “invisible hand” of the market - the automatically equilibrium mechanism of the market. He proved that competition, equalizing profit rates, leads to the optimal distribution of labor and capital, a regulator of private and public interests.

The “invisible hand” can operate successfully only in conditions of sufficiently intense competition. The mechanism of competition forces the entrepreneur to constantly look for ways to reduce production costs, otherwise it is impossible to reduce the price and increase profits due to increased sales volume.

Although A. Smith did not consider the specific elements of the market mechanism that often interfere with the achievement of the optimum, he did take the first step towards understanding competition as an effective means of price regulation:

Based on the theory of competitive prices, he formulated the concept of competition as competition that increases prices (when supply is reduced) and decreases prices (when there is excess supply);

Identified the main conditions for effective competition, including the presence of a large number of sellers, comprehensive information about them, mobility of the resources used;

For the first time he showed how competition, by equalizing profit rates, leads to the optimal distribution of labor and capital between industries;

Developed elements of the perfect competition model and theoretically proved that in its conditions maximum satisfaction of needs is possible;

Made a significant step towards the formation of the theory of optimal resource allocation under conditions of perfect competition.

Free competition, the theoretical foundations of which were postulated by A. Smith, completely excludes any conscious control over market processes. The coordinating element in his theoretical provisions is the price system in a completely decentralized economy.

D. Ricardo, developing the ideas of price regulation of the market through competition, built the most impeccable theoretical model of perfect competition, with the functioning of the market system in the long term. This approach allowed us to get away from the “details” associated with government regulation, monopoly power, geographical features of the market, etc., which are not of decisive importance in the long term.

For the conditions considered by D. Ricardo, it is fundamental that prices are formed only under the influence of supply and demand as a result of competition. Competition plays a decisive role in establishing price balance. The generalizing element of the study was the “law of markets”, which postulates a tendency to an equilibrium state at full employment.

Significant results complementing the model of perfect competition, but from the position of the law of value, were proposed in Capital K. Marx.

In his opinion, competition, by regulating the distribution of capital between industries, contributes to the tendency of the rate of profit to decrease, the formation of an average rate of profit. “Equality of profits in all sectors of industry and the national economy presupposes complete freedom of competition, freedom of capital flow from one industry to another. And private ownership of land creates a monopoly, an obstacle to this free flow. Due to this monopoly, for example, the products of agriculture, characterized by a lower composition of capital and a higher rate of profit, do not go into a completely free process of equalization of the rate of profit; the owner of the land, as a monopolist, gets the opportunity to keep the price above the average, and this monopoly price gives rise to absolute rent.”

The behavioral interpretation of competition was also characteristic of neoclassical political economy. However, neoclassicists associated competition with the struggle for rare economic goods, as well as for the money of consumers with which they can be purchased. Rarity, in their understanding, means that the quantity of goods is insufficient in comparison with the needs of people.

The neoclassical school, which flourished in the 19th century, presented an even more accurate and complete picture of the influence of perfect competition on the price system. The economy of Western society became increasingly centralized and free price regulation, at this stage of development, was put into practice as never before, attracting the attention and inspiration of many famous economists. Neoclassical concepts can be considered especially significant in this sense. A. Marshall. Developing the basic principles of the classics, he more consistently and fully substantiated the mechanism for automatically establishing equilibrium in the market with the help of perfect (pure) competition and the operation of the laws of marginal utility and marginal productivity. However, A. Marshall went much further. He was the first to criticize the “conventions” of the pure competition model. The development of a theory for analyzing partial and long-term stable equilibrium in the market, as well as taking into account the development of technology and consumer preferences when determining relative prices, made it possible to create the foundations of the theory of a new model of competition - monopolistic.

Critics of the perfect competition model have pointed to elements of monopoly that permeate the economy and are not reflected in the existing concept. The chronic deficit of the solvent balance of many European countries, the sharp slowdown in export growth, the increase in the power of monopolies and other consequences of the first stage of the general crisis at the beginning of the 20th century confirmed the inconsistency of non-intervention approaches to the process of establishing market balance.

Along with the behavioral interpretation, starting from the end of the 19th century, another one began to penetrate into economic theory, structural concept competition, which subsequently came out on top. Among its authors were F. Edgeworth, A. Cournot, J. Robinson, E. Chamberlin. The positions of these scientists in modern Western economic science are so strong that the term “competition” itself is most often used in its structural sense. A market is called competitive when the number of firms selling a homogeneous product is so large and the share of a particular firm in the market is so small that no one firm alone can significantly influence the price of the product by changing sales volume.

The works of J. Robinson “The Economic Theory of Imperfect Competition” and E. Chamberlin “The Theory of Monopolistic Competition” summarized discussions about the nature of pricing under monopoly conditions and the emergence of non-price forms of competition. Both authors proceed from the fact that the market price is not determined by the collective actions of market participants, since the heterogeneity of the product deprives the buyer of the opportunity to have complete information about prices, and of manufacturing firms to compete with each other due to the lack of choice of more efficient activities.

Entered E. Chamberlain the concept of “monopolistic competition” has become an alternative to the concept of “pure competition”. He argued that the essence of a monopoly is control over supply, and therefore price, which is achieved by increasing the interchangeability of competing goods, i.e. product differentiation. Wherever there is any degree of differentiation, each seller has an absolute monopoly of his own product, but is at the same time subject to competition from substitutes. Based on this, he believed that it is right to speak of the position of all sellers as “competing monopolists” under the influence of the forces of “monopolistic competition.”

In developing his idea about the process of “product differentiation” as a natural reaction of competitors to the no less natural manifestation of competition itself, E. Chamberlain substantiates the growing influence of non-price factors of competition on this process, meaning that it is caused by special properties (factory brand, unique packaging) and individual features the quality of goods and advertising.

Unlike E. Chamberlin, who linked monopolistic competition with one of the characteristics of the natural state of the market in equilibrium, J.Robinson saw imperfect competition as a violation and loss of the normal equilibrium state of a competitive economic system. As a result of her research, J. Robinson could well draw conclusions about specific measures of government intervention in the economy in order to eliminate the contradictions of imperfect competition that she identified. A detailed justification for such measures was proposed several years later by J.M. Keynes.

Theories of state regulation of the economy in a market economy have two directions. One of them is based on the teachings of J.M. Keynes and his followers. The government intervention measures they recommend are called “Keynesian.” Another direction substantiates concepts alternative to Keynesianism, the authors of which are usually called neoliberals.

According to many economists, "General Theory" J.M. Keynes was a turning point in economic science of the 20th century. and largely determines the economic policies of countries today. Its main idea is that the system of market economic relations is not perfect and self-regulating, and that the maximum possible employment and economic growth can only be ensured by active government intervention in the economy.

The neoliberal concept is based on the idea of ​​​​the priority of conditions for unlimited free competition, not despite, but thanks to a certain intervention of the state in economic processes. Neoliberals advocate liberalization of the economy, the use of the principles of free pricing, and a leading role in the economy of private property and non-state economic structures.

This understanding of competition, as we see, differs significantly from its definition in the classical theory, which did not distinguish between competition and rivalry. The classics, speaking of competition, meant only perfect competition, in which the interdependence of sellers is so small that it can be neglected. In a competitive market, all firms are independent of each other in the sense that the actions of one do not have any noticeable impact on the behavior of other firms. With such competitive behavior - rivalry, no firm can become a leader in the market, that is, a monopoly is impossible.

In addition to the behavioral and structural interpretation of competition, in economic theory there is also a functional approach to competition, as well as a characterization of competition as a “discovery procedure.”

Functional approach to the definition of competition is associated, in particular, with the name of the Austrian economist J. Schumpeter. In his theory of economic development, he defined competition as the struggle between the old and the new. This struggle is being waged by entrepreneurs - organizers of production, paving new paths, implementing new combinations of resources. According to Schumpeter, the task of an entrepreneur is to implement innovations, fight routine, not do what others do, and become a “creative destroyer.” Then he can win the competition by displacing from the market those entrepreneurs who use outdated technologies or produce products that are not in demand.

Another Austrian economist and political philosopher - F. von Hayek viewed competition even more broadly, understanding it as a “discovery procedure.” In his opinion, it is important for an entrepreneur, focusing on an increase or decrease in prices for resources and the goods produced with their help, to understand in which direction he needs to act, what, how and for whom to produce. In the market, only thanks to prices and competition does the hidden become apparent. Only the “procedure” of competition “discovers” what resources and in what quantity must be used, what, how much, where and to whom to sell.

In recent years, a new assessment of competition has been given in the works of a modern American economist who developed the theory of competitive advantage, M.Porter. He defined the competitiveness of a product in terms of “the value of the product for the consumer.” In his opinion, the value of any purchased product directly depends on the profit that its use will bring.

Porter believes that every competitive product has a selling price that is lower than customer value. For the consumer, the unpaid part of the consumer value is equal to the additional profit he received from using the product. For the supplier, it corresponds to the competitiveness of its products.

At the same time, the consumer is interested in ensuring that the unpaid share is as large as possible. The supplier's attitude to this value is ambivalent. On the one hand, he also benefits from its large size: a significant margin of competitiveness guarantees that his product will be purchased, on the other hand, by increasing the selling price and reducing the margin of competitiveness, he increases his profit.

Thus, three approaches to the definition of competition, presented by various theoretical schools of economic science, were considered. Each approach has its advantages and disadvantages; as economic science has developed, theorists in this area have improved their ideas about competition as the driving mechanism of a market economy.

1. The essence of competition, the conditions of its existence and functions

In a market economy system, a firm operating in the market is considered not on its own, but taking into account the entire set of relationships and information flows connecting it with other market entities. The environmental conditions in which the company operates are usually called the company's marketing environment. The marketing environment of a company consists of a microenvironment and a macroenvironment. The microenvironment is represented by forces that are directly related to the company itself and its ability to serve clients, that is, suppliers, intermediaries, clients, competitors and contact audiences.

Thus, competitors are an important component of the company’s marketing microenvironment, without taking into account and studying which it is impossible to develop an acceptable strategy and tactics for the company’s functioning in the market. The presence of competing firms gives rise to such a phenomenon in the economy as competition.

The concept of competition has many meanings and is not covered by any universal definition. Competition is both a way of managing and a form of existence of capital in which one individual capital competes with another. Competition is rivalry, competition between commodity producers participating in the market for the most favorable conditions for the production and sale of goods in order to obtain the maximum possible profit on this basis. At the same time, competition is a mechanism for automatically regulating the proportions of social production.

There are other definitions of competition. In the literature devoted to this problem, there are three approaches to defining competition ( see Appendix 1).

The most important thing in the definition of competition is the fact that without competition there is no market system. Without competition, the market cannot reveal the creativity of market subjects, their initiative and search, and does not realize everything that makes the market the driving force of human progress. Competition in a market economy, first of all, is a state, competition, comparison of economic conditions and results of economic entities.

To better understand competition, it must be compared to a monopoly. The fact is that both one and the other type of relationship between market participants are asymmetrical. The contrast of their properties is rooted in completely different indicators of market conditions. A visual representation of this can be presented in the table, which characterizes the position of sellers of goods (see Table 1).

Table 1

Comparative table of the concepts of “competition” and “monopoly”

Market state parameters	Competition	Monopoly
Number of sellers
Barriers to entry and exit from the market		Yes (no occurrence)
Product differentiation	No (same products of the same type)	No (one product)
Firms' participation in price controls		Full control

There are three main prerequisites, the presence of which is necessary for the functioning of the competition mechanism:

Firstly, the equality of economic agents operating in the market (this largely depends on the number of firms and consumers);

Secondly, the nature of the products they produce (the degree of homogeneity of the product);

Thirdly, freedom of entry into and exit from the market (primarily the absence of barriers to entry in the form of organizational associations and structures).

Competitive trends in a developed market are significantly more stable and stronger than monopolistic ones. In reality, the winners in the competition are sometimes large, sometimes small, sometimes strong, and sometimes even weak firms. The key to why a monopoly does not drive out competition lies in understanding how different the competing firms are. Competition cannot be reduced to the struggle of the strong against the weak: in this case, super-powerful monopolies would actually crowd out all weaker rivals.

In reality, competition is based on a more complex formula. There are several types of business units, and each of them has its own characteristics: for leading monopolies it is strength, for small firms it is flexibility, for specialized companies it is adaptability to special segments (“niches”) of the market, for innovative firms it is the advantage of pioneers. In specific market situations, one quality or another receives a decisive advantage.

Competition is objectively coercive for participants in market relations, and primarily for commodity producers. It forces them to systematically apply new technologies, increase labor productivity, and reduce or contain prices for manufactured products. In other words, competition systematically influences individual production costs in the direction of reducing them, forces them to save resources, and achieve the most rational combination of the factors of production used.

The essence of competition is that, on the one hand, it creates conditions in which the buyer in the market has a great variety of opportunities to purchase goods, and the seller has a wide variety of opportunities to sell them. On the other hand, two parties take part in the exchange, either of which puts its own interests above the interests of the partner. As a result, both the seller and the buyer, when concluding an agreement, must make a mutual compromise when determining the price, otherwise the agreement will not take place, and each of them will suffer losses.

An indispensable condition for competition is the independence of the subjects of market relations from certain “superior” and external forces. This independence is manifested, firstly, in the ability to independently make decisions about the production or purchase of goods or services; secondly, in the freedom to choose market partners. In In the process of competition, economic entities seem to mutually control each other.Competition is also an important tool for regulating the proportions of social production in market conditions.

Competition contributes to the establishment of a certain order in the market, guaranteeing the production of a sufficient quantity of high-quality goods that are sold at an equilibrium price.

The consequence of competition is, on the one hand, the aggravation of production and market relations, and on the other, an increase in the efficiency of economic activity and the acceleration of scientific and technical progress. Competition refers to uncontrollable factors that affect the activities of an organization that cannot be controlled by the organization.

Having examined the essence of competition and the conditions for its existence, let us move on to defining the functions of competition.

The following functions of competition can be distinguished:

Regulation function. In order to survive in the struggle, the entrepreneur must offer products that the consumer prefers (consumer sovereignty). Hence, factors of production, under the influence of price, are directed to those sectors where they are most needed.

Function of motivation. For an entrepreneur, competition means chance and risk at the same time:

Enterprises that offer better quality products or produce them at lower production costs are rewarded in the form of profits (positive sanctions). This stimulates technological progress;

Enterprises that do not respond to customer wishes or violations of competition rules by their rivals in the market are punished in the form of losses or are forced out of the market (negative sanctions).

Distribution function . Competition not only includes incentives for higher productivity, but also allows income to be distributed among businesses and households according to their effective contribution. This corresponds to the prevailing competitive principle of reward based on results.

Control function . Competition limits and controls the economic strength of each enterprise. For example, a monopolist can set a price. At the same time, competition gives the buyer the opportunity to choose among several sellers. The more perfect the competition, the fairer the price.

Competition policy is designed to ensure that competition can perform its functions. In every market economy, there is a danger that competitors will try to evade the regulations and risks associated with free competition by, for example, resorting to price fixing or imitation of trademarks. Therefore, the state must issue regulations that regulate the rules of competition and guarantee:

Quality of competition;

The very existence of competition;

Prices and quality of products should be the focus of competition;

The offered service must be commensurate in price and other contractual terms;

Trademarks and marks protected by legal norms help the buyer to distinguish goods by their origin and originality, as well as to judge some of their qualities;

Time-limited patent protection (20 years) and registered industrial designs, as well as designs for industrial aesthetics.

Thus, competition in a market economy plays a significant role in economic development and retains its most important place in the market mechanism.

Competition embodies a spontaneously regulating (self-regulating) principle. The forces of competition act towards increasing the impact of all factors of economic efficiency, leading to ensuring a dynamic balance of supply and demand. Due to its spontaneous nature, competition, especially if it has complete dominance in the market, can cause side negative economic and social consequences. However, in general, we can say that competition with its ruthless laws is the main engine of modern progress.

1.3. Types of competition

There are many criteria and approaches to classifying competition ( see Appendix 2). In accordance with various approaches, inter-industry, intra-industry, functional, specific, subject, semi-closed, closed, open, homogeneous, homogeneous, heterogeneous, heterogeneous competition are distinguished.

The diagram showing the classification of competition by methods of rivalry and market state will be taken as a basis when considering types of competition, since it is the most popular (see Figure 1).

Fig. 1 Classification of competition by market conditions and methods of competition.

1.3.1. Perfect and imperfect competition

There are many definitions of the term "perfect competition":

1. severe conflictual competition between economic entities, when none of them is able to have a decisive influence on the general conditions for the sale of a homogeneous product in a given market;
2. competition of economic entities on the product market, in which none of them is able to exert a decisive influence on the general conditions for the sale of a homogeneous product on this market;
3. a type of industry market in which many firms sell a standard product and no single firm has a large enough market share to influence the price of the product. The price for each firm is considered to be set by the market. Entry into and exit from the industry is free;
4. the competition of a large number of small buyers and sellers, each of whom has sufficiently complete market information, and therefore none of them can control market demand, the supply of a product to the market, or its price. The product is standard. There are no entry or exit barriers;

Perfect (free) competition is based on private property and economic isolation. It assumes that there are many independent firms in the market that independently decide what to create and in what quantities.

Perfect competition exists in areas of activity where there are quite a lot of small sellers and buyers of an identical (same) product and therefore none of them is able to influence the price of the product.
Here the price is determined by the free play of supply and demand in accordance with the market laws of their functioning. This type of market is called a "free competition market".

The existence of a huge number of buyers and sellers means that no one of them has more information about the market than the others. The seller, coming to the market, finds an already established price level, which is beyond his power to change, because the market itself dictates the price at every moment of time. This situation allows new sellers to start producing products on equal terms (price, technology, legal conditions) with existing sellers. On the other hand, sellers can freely leave the market, which implies the possibility of unhindered exit from the market. Freedom of “market” movement creates conditions for the number of producers to always change in the market. At the same time, the remaining sellers still lack the ability to control the market, since they represent small-scale production and are extremely numerous.

The perfect competition model is characterized by five features:

1. The presence of a large number of economic agents, sellers and buyers;
2. Maximum awareness of sellers and buyers about products and prices.
3. None of the sellers or buyers is able to influence the market price and each other;
4. Uniformity of products sold;
5. Access to the market is not limited by anyone or anything.

Compliance with all conditions ensures free communication between producers and consumers. Perfect competition is also a condition for the formation of a market mechanism, price formation and self-adjustment of the economic system through the achievement of an equilibrium state, when the selfish motives of individuals to obtain their own economic benefit are turned to the benefit of the whole society. It is easy to see that no real market satisfies all of the above conditions. Therefore, the scheme of perfect competition has mainly theoretical significance.

Perfect competition presupposes the following conditions:

Let's consider each of the conditions in more detail.

1. Product Uniformity. In order for competition to be perfect, the goods offered by firms must meet the condition of product homogeneity. This means that the products of firms are indistinguishable in the minds of buyers, that is, the products of different enterprises are completely interchangeable.

Under these conditions, no buyer will be willing to pay a higher price to the firm than he will pay to its competitors. After all, the goods are the same, buyers do not care which company they buy them from, and they, of course, choose the cheapest ones. That is, the condition of product homogeneity actually means that the difference in prices is the only reason why a buyer can choose one seller over another.

2. Small sizes. Further, with perfect competition, neither sellers nor buyers influence the market situation due to the smallness and number of all market entities. This means that there are a large number of small sellers and buyers in the market, just as any drop of water is made up of a gigantic number of tiny atoms.

At the same time, the purchases made by the consumer (or sales by the seller) are so small compared to the total volume of the market that the decision to reduce or increase their volumes does not create either surpluses or shortages. The total size of supply and demand simply “does not notice” such small changes. So, if one of the countless beer stalls in Moscow closes, the capital’s beer market will not become more scarce, just as there will not be a surplus of the drink beloved by the people if another “point” appears in addition to the existing ones.

Inability to dictate the price to the market. The above restrictions (homogeneity of products, large number and small size of enterprises) actually predetermine that with perfect competition, market entities are not able to influence prices.

3. No barriers. The next condition for perfect competition is the absence of barriers to entry and exit from the market. When such barriers exist, sellers (or buyers) begin to behave as a single corporation, even if there are many of them and they are all small firms.

All sellers follow well-known informal rules (in particular, they keep prices at least at a certain level). Any stranger who decides to reduce prices or simply trade “without permission” has to deal with bandits. And when, say, the Moscow government sends disguised police officers to the market to sell cheap fruit (the goal is to force the criminal “owners” of the market to reveal themselves and then arrest them), then it is fighting precisely to remove barriers to entry into the market.

On the contrary, the absence of barriers or freedom to enter and leave the market (industry) typical of perfect competition means that resources are completely mobile and move without problems from one type of activity to another.

In other words, the absence of barriers means absolute flexibility and adaptability of a perfectly competitive market .

4. Perfect Information. The last condition for the existence of a perfectly competitive market is that information about prices, technology and probable profits is freely available to absolutely everyone. Firms have the ability to quickly and efficiently respond to changing market conditions by moving the resources they use. There are no trade secrets, unpredictable developments, or unexpected actions of competitors. That is, decisions are made by the company in conditions of complete certainty regarding the market situation or, what is the same, in the presence of perfect information about the market.

A “perfect competitor” is one who can sell whatever he wants at the prevailing market price, but is unable to influence it up or down. In turn, a “fully competitive industry” is one that consists exclusively of numerous perfect competitors.

The advantages of perfect competition include the following:

• production under conditions of perfect competition is organized technologically more efficiently (i.e., equilibrium is established at the level of long-term and short-term minimum average costs).
• the company and industry operate without surpluses or deficits. Therefore, the condition of long-term equilibrium in a competitive industry is actually equivalent to the identity of supply and demand for a given product. The break-even of firms in the long term is also of fundamental importance. On the one hand, this guarantees the stability of the industry: firms do not incur losses. On the other hand, there are no economic profits, i.e. income is not redistributed in favor of this industry from other sectors of the economy.

Perfect competition is not without a number of disadvantages:

• Small businesses, typical of this market, are unable to use the most efficient technology, since economies of scale are often available only to large firms.
• The perfectly competitive market does not stimulate scientific and technological progress. Small firms usually lack the funds to finance lengthy and expensive research and development activities.

Thus, for all its advantages, the perfectly competitive market should not be an object of idealization. The small size of companies operating in a perfectly competitive market makes it difficult for them to operate in a modern world saturated with large-scale technology and permeated with innovative processes.

Imperfect competition is defined as follows:

• a market in which at least one of the signs of perfect competition is not observed;
• a characteristic of a market where two or more sellers, having some (limited) control over price, compete with each other for sales;
• markets in which either buyers or sellers take into account their ability to influence the market price.

Since the model of perfect competition is a theoretical abstraction, all real-life markets are imperfect to one degree or another.

In a perfectly competitive market there are many buyers and sellers, none of whom are large enough to influence the market price. As a result, buyers and sellers in a competitive market view the price as fixed and beyond their control. To maximize their profits, sellers choose the level of output at which marginal cost equals price.

However, in imperfectly competitive markets, individual sellers can influence the price they receive for their products. When figuring out how to maximize profits, they naturally take this ability into account.

The prerequisites for imperfect competition are:

1) a significant market share of individual manufacturers;

2) the presence of barriers to entry into the industry;

3) heterogeneity of products;

4) imperfection (inadequacy) of market information.

Each of these factors individually and all of them together contribute to the deviation of market equilibrium from the point of equality of supply and demand. Thus, a single manufacturer of a certain product (monopolist) or a group of large firms colluding with each other (cartel) is able to maintain inflated prices without the risk of losing customers; there is simply nowhere else to get this product.

The criterion of imperfect competition is a decrease in the demand curve and prices as the firm's output increases. Another formulation is often used: the criterion of imperfect competition is the negative slope of the demand curve for the firm's products.

Thus, if under conditions of perfect competition the volume of a firm's output does not affect the price level, then under conditions of imperfect competition such an influence exists.

The economic meaning of this pattern is that a firm can sell large volumes of products under imperfect competition only by lowering prices.

In fact, with perfect competition, the price remains the same no matter how many products the firm produces, because its size is negligibly small compared to the total market capacity. Whether the mini-bakery doubles, maintains at the same level or completely stops baking bread, the general situation on the Russian food market will not change in any way and the price of bread will remain its value.

On the contrary, the presence of a connection between production volumes and the price level directly indicates the importance of the company within the market. If, say, AvtoVAZ cuts the supply of Zhiguli cars by half, then there will be a shortage of passenger cars and prices will jump. And this is the case with all types of imperfect competition.

Under perfect competition, a firm cannot raise its price, otherwise people will buy goods not from it, but from competitors. Because of this, there are no incentives to artificially reduce production. On the contrary, the greater the output, the greater the company's revenue. With imperfect competition, the company is significant on a market scale. If it reduces production volumes, the prices of its goods will rise. This creates incentives to understate output.

Imperfect competition is a market situation in which at least one condition of perfect competition is not met.

Under conditions of imperfect competition, the seller is able to manipulate price and production volume in order to obtain maximum profit.

In theory, there are different types of markets with imperfect competition: monopolistic competition, oligopoly, monopoly, which will be discussed in the next chapter.

1.3.2. Price and non-price competition

Competition is an element of the market mechanism, economic rivalry between market entities for market share and profits, obtaining orders and ensuring sales. There are price and non-price competition.

Price competition involves selling goods or offering services at prices lower than those of competitors.

Price competition dates back to those distant times of free market competition, when even homogeneous goods were offered on the market at a wide variety of prices. Reducing the price was the basis by which the merchant distinguished his product, drawing attention to it and, ultimately, winning the desired market share.

When markets are monopolized, divided among themselves by a small number of large firms that have captured key positions, manufacturers strive to keep prices constant for as long as possible in order to purposefully reduce costs and marketing expenses to ensure an increase in profits. In monopolized markets, prices become less elastic. When equilibrium has been established, a new attempt to reduce the price leads to competitors reacting in the same way. The positions of firms in the market do not change, but the rate of profit falls and the financial condition of firms in most cases deteriorates. That is why nowadays there is often not a decrease in prices as scientific and technical progress develops, but an increase in them: the increase in prices is often inadequate to the improvement in the consumer properties of goods, which cannot be denied.

Price competition involves selling goods or offering services at lower prices than competitors. In a developed market economy, price reductions can occur either by reducing production costs or by reducing profits. Small firms can only reduce prices for a very short time for competitive purposes. Large companies may completely forego profits for a long time in order to force competitors out of the market. In the future, they can significantly increase the price and compensate for the losses incurred. Price reductions in conditions of price competition usually occur without reducing product quality or changing the range of goods.

Price competition is used mainly by outsider firms in the fight against monopolies. In addition, pricing methods are used to penetrate markets with new products (this is not neglected by monopolies where they do not have an absolute advantage), as well as to strengthen positions in the event of a sudden aggravation of the sales problem.

Methods of price competition include:

1. competition between firms selling the same product, which try to force out other sellers by selling the product at the lowest price and secure the largest sales for themselves. This competition lowers the price of the goods offered;

2) competition between buyers in the same industry, which leads to higher prices for the goods offered. The seller increases his price based on calculations showing the losses that the buyer may suffer as a result of unsatisfied needs;

3) competition between buyers and sellers: buyers prefer to buy goods cheaper, sellers want to sell them more expensive. The outcome of this competitive struggle largely depends on the balance of power of the competing parties;

4) inter-industry competition, i.e. competition between industries producing substitute goods (analogues, substitutes). The development of such competition can cause both a decrease and an increase in prices in the market. The regulating element in this case is the price of the substitute product.

There are direct and hidden price competition. In conditions of direct price competition, the company openly announces price reductions for goods and services. For example, in 1982, Data General reduced the price of one of its storage devices by 68%, Perkin-Elmers by 61%, and Hewlett Packcord by $37.5%, resulting in an average price drop from $20 (early 1981) to $5 (mid 1882). With hidden price competition, the company improves the properties of its products, but increases the price by a disproportionately small amount to the improvement. Thus, in 1976, Crate Reseng released a computer with a productivity of 1 million operations/sec and a price of 8.5 million dollars, and in 1982, a computer whose performance was 3 times higher, and the price increased only by 15%. The main condition for successful competition through prices is constant improvement of production and cost reduction. Only the one that has a real chance of reducing production costs wins.

Non-price competition is usually understood as a set of actions through which entrepreneurial firms seek to increase their competitive advantages without resorting to price variations. Non-price competition is carried out mainly through improving the quality of products and the conditions of their sale. Non-price competition through the sale of products is called competition based on sales conditions. This type of competition is based on improving customer service. This includes influencing the consumer through advertising, improving trade, establishing benefits for customer service after purchasing a product, i.e. during its operation.

Advertising has always been the strongest tool of non-price competition; today its role has increased many times over. With the help of advertising, companies not only convey to buyers information about the consumer properties of their goods, but also build confidence in their product, pricing, and sales policies, trying to create an image of the company as a “good citizen” of the country in whose market the entrepreneur acts in foreign trade .

Non-price methods include the provision of a large range of services (including staff training), free after-sales service, crediting old returned goods as a down payment for a new one, supply of equipment on the terms of “finished goods in hand”.

The reasons for the emergence of non-price competition: a high degree of satisfaction of simple and most urgent needs; income level growth; expansion of market volumes.

It is important that the product offering is unique from the consumer's point of view. This can be facilitated by the high quality of the product. The better the product, the more freedom the company has in pricing; the range of competition tools is quite wide.

Currently, various types of marketing research have become very developed, the purpose of which is to study the needs of the consumer, his attitude towards certain goods.

In conditions of non-price competition, the manufacturer usually takes into account factors such as the environmental friendliness of the product and safety for consumption. Trademarks and marks can be used as instruments of non-price competition. In modern conditions, non-price competition is much more important than price competition.

Chapter 2. Imperfect competition: forms of competition

under conditions of monopolistic production.

Depending on the relationship between the number of producers and the number of consumers, the following types of competitive structures are distinguished:

1. Pure competition represents a situation when there is a large number of independent producers of some homogeneous product and a mass of isolated consumers of this product on the market. Pure or free competition is also commonly called perfect competition, and the other three types are called imperfect competition.

2. A huge number of isolated consumers and a small number of producers, each of which can satisfy a significant share of the total demand. This structure is called oligopoly, and gives rise to so-called imperfect competition.

3. The limiting case is monopoly. In this case, the mass of consumers is opposed by a single producer capable of satisfying the total demand of all consumers. When the market is represented by a relatively large number of manufacturers offering heterogeneous (dissimilar) products, then they talk about.

4. There is also pure monopoly. In this case, there is only one producer of the product and many consumers on the market.

Let us consider in more detail the main of the above market structures.

2.1. Free (pure) competition

Pure competition is a market situation in which numerous, independently operating producers sell identical (standardized) products, and none of them is able to control the market price.

Such an identical, or standardized, product could be, for example, wheat, corn, sugar, or company shares. This means that all sellers of such goods offer almost the same product; there is no difference in consumer properties. Therefore, the buyer should not bother finding out the differences in quality and properties - in fact, there are none. And for the seller it becomes almost pointless to conduct non-price competition. Each of the sellers is not able to influence the price of the product on the market. This is due to the fact that the share of any seller in the total volume of products offered on the market is very small. Let us highlight the main characteristics of pure competition:

a) the number of participants in the exchange - sellers and buyers;

b) identical, standardized products. This requirement can only be met by simple goods, examples of which have previously been named;

c) free access to markets for new sellers and the possibility of the same free exit from them. d) availability of complete information from the exchange participants. Buyers must have information about available sellers, their prices, and other sales conditions.

These conditions are in most cases difficult to achieve today. Therefore, pure, or perfect, competition is a rare type of competition in the modern economy. Forms of imperfect competition predominate, where sellers have some control over the market price.

2.2. Oligopoly

Oligopoly- this is a market structure in which there are not very many sellers involved in the sale of a product, and the emergence of new sellers is difficult or impossible.

Typically, oligopolistic markets have between two and ten firms that account for half or more of a product's total sales. In oligopolistic markets, at least some firms can influence price due to their large shares of total output. Sellers in oligopolistic markets know that when they or their rivals change prices or quantities produced, the consequences will affect the profits of all firms in the market. Sellers are aware of their interdependence.

The reason for the existence of oligopolies: cost savings, barriers to entry and mergers.

The actions of an oligopoly include attempts to control prices, advertise products, and set output levels. The small number of competitors forces them to consider each other's reactions to their decisions. In many cases, oligopolies are protected by barriers to entry similar to those imposed by monopoly firms.

Oligopolistic markets have the following common features.

1. There are only a few companies operating on the market. The product they produce can be either standardized or differentiated.

2. Some firms in an oligopolistic industry have large market shares, so some firms in the market have the ability to influence the price of a product by varying its availability in the market.

3. Firms in the industry are aware of their interdependence. Sellers always consider the reactions of their competitors when setting prices, sales targets, advertising expenditures, or other business measures.

The main characteristics of oligopolistic competition include:

a) few competitors. Each of them usually has a fairly large market share of some product or service;

b) offering standardized or differentiated products. A number of industrial goods, such as steel, aluminum, cement, are standardized products and are usually offered under oligopolistic competition. Differentiated goods in oligopolistic markets can be, for example, cars, computers, refrigerators, vacuum cleaners, and telephones. Oligopolistic enterprises are usually large-scale structures engaged in large-scale production;

c) the difficulty of entering the industry for new enterprises. Here, potential competitors and possible candidates for entry into the industry face very serious problems. This includes the formation of large start-up capital, technological difficulties, accessibility to the most important raw materials, and great opportunities for “veterans” in various ways to prevent the emergence of “newcomers” in the industry, and more. It is really difficult for new companies to break through here;

d) the presence of incentives for mergers and conspiracies aimed at reducing or eliminating competition. The merger of competitors allows you to obtain a larger market share and use economies of scale to a greater extent: both “at the output” - when selling your products (this can be done with lower unit costs), and “at the input” - when solving problems, resource provision (purchasing large quantities of resources at low prices). Collusions - on prices, distribution points, sales volumes - are possible here because the number of competitors is limited and they are all “in plain sight,” which creates fertile ground for such aspirations.

Based on the type of product, a distinction is usually made between a pure oligopoly and a differentiated (by product) oligopoly. Pure oligopoly - producing a homogeneous product. In this case, the price of the product on the market is approximately the same. An example of such a market is the market for cement, chemical products, steel, etc.

An oligopoly that produces a variety of products for the same functional purpose is differentiated. Prices of goods in such a market are usually distributed according to price clusters - groups of prices for similar but heterogeneous goods. For example, price groups for cars of different classes.

2.3. Monopoly

The origin of the name of this type of imperfect competition is associated with the real circumstance that many sellers, while offering similar products, strive, at the same time, to give them unique, special properties. These differences can be either real or imaginary.

Monopolistic competition is a market situation in which numerous sellers sell similar products in an attempt to give them real or perceived unique qualities.

Market monopolistic competition consists of many buyers and sellers who transact not at a single market price, but over a wide range of prices. The presence of a price range is explained by the ability of sellers to offer buyers different product options. Sellers compete by offering a differentiated product in a market where new sellers may enter. Real products may differ from each other in quality, properties, and appearance, but these differences, if any, are very insignificant. Differences may lie in the services accompanying the product. Buyers see differences in offerings and are willing to pay different prices for products. In order to stand out in something other than price, sellers strive to develop different offers for different market segments and widely use the practice of assigning brand names to products, advertising, and personal selling methods.

The main characteristics of monopolistic competition include:

a) a relatively large number of small producers;

b) selling similar but not identical products. Different manufacturers are engaged in creating varieties of goods that satisfy, in principle, the same need. But their products cannot be called identical. There is product differentiation here;

C) the individual producer has very limited control over the market price. This is due, firstly, to the fact that there are quite a lot of manufacturers, which means that the share of the goods offered per one is relatively small. Secondly, the demand for such products is characterized by a fairly high degree of elasticity: buyers are sensitive to changes in price, and if it increases, they can switch to purchasing similar products from other sellers, ignoring some features in the properties of the goods.

d) various agreements between competitors to limit competition, for example, to implement an agreed pricing policy, are practically unfeasible. The thing is that there are quite a lot of competitors, and, in addition, the very boundaries of the field of competition and the composition of its participants are blurred and uncertain;

e) there remain opportunities for relatively easy entry of new producers into the industry. The scale of start-up capital and the level of technological complexity do not pose insurmountable barriers to the entry of new competitors into the industry.

In a market of monopolistic competition, each firm produces its own product, and all together - products of one product group. The product produced by each company is somewhat different from the product of the same group produced by other companies. These are, as a rule, goods (or services) for one purpose - soft drinks, medicines, gasoline of different brands, etc. The products of the group are close substitutes, but differ from each other in quality of workmanship, packaging, design, trademark, after-sales service, etc. And they hardly differ in price. Each firm is the sole producer of its goods and, in this sense, a monopolist.

The presence of a large number of producers results in each firm having a small market share and very limited control over the market price. In addition, secret collusion between firms to limit production volume and artificially increase prices is virtually eliminated.

Product differentiation under monopolistic competition can take a number of different forms:

1. Product quality. "Real differences" including features, materials, design and workmanship are critical points of differentiation. For example, in any city there are many eateries. In one of them, when preparing hamburgers, more attention is paid to the aroma of the buns themselves, in the other - to the quality of the chopped cutlets themselves.
2. Services. Services and conditions are important aspects of product differentiation. The courtesy and helpfulness of store employees, the firm's reputation for serving customers or exchanging its products, and the availability of credit are service-related aspects of product differentiation.
3. Products can be differentiated based on placement and accessibility. Thus, a gas station located on one of the main highways of the country can sell gasoline at a higher price than one located 2-3 km from the highway.
4. Product differentiation can be created through advertising, packaging, branding and branding. When a particular brand of jeans or perfume is associated with the name of a celebrity, this can affect the level of demand.

From the description of product differentiation it follows that in conditions of monopolistic competition, price competition is accompanied by non-price competition.

Entering an industry with monopolistic competition is relatively easy. The need to obtain a product different from that of a competitor and the need for advertising may create some difficulty.

2.4. Pure monopoly

A pure, or absolute, monopoly is a market situation in which there is only one seller of a good that has no close substitutes. The absence of close substitutes means that the buyer has a choice not between goods, but between whether to buy a given product or refuse to satisfy the need for it altogether. There is only one seller, in which case he is the king and the buyer is the servant. Such a seller has enormous power. With a pure monopoly, there is no competition at all.

A monopoly arises when, for various reasons, there is a single producer in the product market - a monopolist, capable of satisfying the total demand of the entire mass of consumers of this product. It follows that the product of a monopoly is unique in the sense that there are no good or close substitutes. The buyer must buy the product from the monopolist or do without. The absence of close substitutes for the monopolized product is important from an advertising point of view. Depending on the type of product or service proposed, a firm may or may not engage in extensive advertising and sales promotion activities. For example, a pure monopolist selling luxury goods might advertise extensively in order to increase demand for its product. Perhaps then more people will want to buy them, abandoning other goods. At the same time, a telephone company that is the only one in a small town has no need to advertise its services, since people have ideas about them and know from whom they should purchase them.

If pure monopolists of a number of public utility enterprises are engaged in advertising, then the reason for this is probably an increase in prestige, and not an increase in market share.

Let us note the main characteristics of a pure monopoly:

a) the only seller;

b) there is no product differentiation,

C) the seller exercises almost complete control over prices.

d) very difficult conditions for new enterprises to enter the industry.

There are several types of barriers to entry into the industry:

Economies of scale: Modern technology in some industries is such that efficient, low-cost production can only be achieved if the producers are extremely large, both in absolute terms and relative to the market. Examples of such industries are the automotive and aluminum industries. If, for example, there are 3 large firms operating in the entire market and each owning approximately 1/3 of this market, then it is extremely difficult for new competitors to penetrate this market: small firms are not able to achieve such cost savings as the leading “troika” and, hence the amount of profit needed to survive and expand.

Natural monopolies: usually the state grants some privileges to these industries. But in exchange for this exclusive right, it reserves the right to regulate such monopolies to prevent abuse of the monopoly power it has granted. Examples of natural monopolies include so-called public utilities - electric and gas companies, bus companies, water supply and communications companies.

The government can also issue patents and licenses, creating legal barriers to entry into the industry. Giving out patents the government seeks to protect the inventor from the illegal hijacking of a product or process by rival firms that did not share in the time, effort, and money that went into its development. The profits from one important patent can be used to fund the research and development work required to develop patentable products. The monopoly power achieved through patents may well increase. Entry into the industry may be limited by the state by issuing licenses. For example, licenses for radio and television stations, educational institutions.

The concept of pure monopoly is an abstraction. There are very few foods that have no substitutes.

It is rare that there is only one seller in a national or global market. Pure monopoly is more common in local markets than in national markets.

The following types of monopolies can be distinguished:

Natural monopoly - the monopoly in this case is due to the fact that over long periods of time the average costs in the industry will be minimal if there is one rather than several competing firms in it;

Accidental monopoly - occurs as a result of a temporary excess of demand over supply of a given product. Is temporary;

Artificial monopoly - arises as a result of restrictions on the production of a given type of product by the state.

Chapter 3. The role of competition in the development of a market economy.

The role of competition in the economic life of society is deep and multifaceted. By promoting the growth of the most efficient industries and eliminating ineffective economic links, competition acts as a mechanism for regulating national economic proportions. It manifests itself as a way to guide entrepreneurs to improve business efficiency.

Competition is a special way of interaction between market entities. From the point of view of an individual entrepreneur, competition is the process of competitive struggle between firms for limited effective demand. In fact, the competitive relations of firms go far beyond the boundaries of individual market segments, even industries, and are a form of struggle for better business conditions. It is this aspect of competition that will reveal its significance and role in economic development.

The economic nature of competition is related to the division of economic power. This means that the very presence of competition, on the one hand, indicates the possibility of securing a certain economic freedom for business entities, and on the other hand, which is especially important, the dispersion of economic power among aspects of the market, allowing them to exercise free choice. Therefore, the role of competition is limited to limited influences, and at the same time serves as a breeding ground for entrepreneurial structures.

Secondly, by ensuring equal principles of competition, it counteracts the absolute dominance of any of the advantages of firms, initially determining the existence of a wide variety of their types and forms. Large enterprises benefit from economic power and scale of production. Small businesses, on the contrary, compensate for their economic weakness with entrepreneurial flexibility. While specialized firms benefit from their adaptability, pioneering firms enjoy first mover advantages. The absence of absolute advantages makes their existence inevitable. It should be borne in mind that if competition as such, in principle, presupposes the existence of entrepreneurial structures of different scale and form of organization, then their actual diversity in the economy depends on the degree of its rigidity.

Finally, competition is a condition for market activity. By setting efficiency criteria and orienting the market towards the search for better business conditions, competition necessitates continuous improvement of forms and methods of management, becoming a “perpetual motion machine” for the development of the market function itself. Not so much improving quality and reducing costs, but also searching for new markets, creating new goods and services; the application of new business methods becomes a daily concern of competitors.

The actual practice of economic life in the world shows that the market is more powerful and effective than any other factor in its movement. The more active the competition and the better the conditions for its manifestation, the higher the efficiency of the functioning of the market. Competition requires a certain, preferably optimal, combination of economic, technological and social prerequisites. Violation of this condition makes it difficult for competition to occur. The result is stagnation in the economy, a decrease in its efficiency, and a possible drop in the living standards of the country's population.

Competition is the core of the modern market mechanism, not only because the scale of its manifestation has grown immeasurably over the past decades. The main thing is that competition is an organic property of the market, its integral feature. The absence of “normal” competition, its destructive or, on the contrary, weak manifestation is a clear indicator of obvious trouble in the market. For example, a “scarce market” eliminates or minimizes competition between producers for buyers, while simultaneously causing competition between buyers for goods

Market competition in our economy was eliminated with the elimination of private property. Total nationalization during the Soviet period led to the disappearance of the market and commodity production, the elimination of one of the initial conditions for the emergence of competition - the isolation of free producers as owners of the means of production and the produced product.

What is necessary in our country for the normal functioning of a market economy? First of all, a favorable competitive environment. The competitive environment can be defined as a historically specific socio-economic structure of social production, a special type of socio-economic relations between subjects and objects. It ensures commodity-money exchange, organized according to the laws of commodity production.

At its core, the competitive environment operates according to strictly calculated target programs. The presence of such an environment is characteristic of a market economy - a special phase in the development of social production. The competitive environment is preceded by the establishment of competition as such, i.e. forms of relationships between economic entities in the process of realizing their individual interests. In its absence, almost any commodity producer, even one who does not occupy a dominant position in the market, has monopoly power, the ability to dictate its terms to consumers.

A special type of monopoly economy has developed in our country, which has no analogues in the world. The reasons for its appearance were:

1) elimination of market economic conditions due to ignoring the laws of commodity production.

2) curtailment of commodity-money relations

3) elimination of competition

4) artificial concentration and narrow specialization of production

5) the predominance of centralism and bureaucracy in economic management, etc.

Our economy is unique: it monopolizes not only production, but also the habitat of economic entities. The state acts simultaneously both as a monopoly producer and as a monopoly manager. Non-state economic entities are embedded in a monopoly environment created by them.

So, the increased role of competition in the modern economic system is as follows:

1) competition ensures an equal position for participants in economic relations - sellers and buyers. Equality is created and maintained by freedom of choice: the buyer has the opportunity to choose a specific counterparty from several or many sellers of some product he needs, and the seller has the same opportunity to voluntarily decide the issue of the geographical location, time and conditions of supply of his product. If, for example, you are not satisfied with the quality of films shown or the repertoire in a certain cinema, you can “punish” this enterprise by refusing to visit it, become a regular client of another cinema, now giving your monetary votes to it. If many movie lovers do what you do, the failing movie theater will find itself in a pretty tough spot. Thus, competition turns out to be an influential tool for influencing one side of the exchange on the other.

2) competition creates one of the main conditions necessary for the effective performance at the cost of coordinating functions. Free pricing is a basic element of the market mechanism, which means that it can be argued that competition is a condition for the viability of the entire market system. Only in conditions of competition can the market effectively perform the functions of distributing resources and final goods. The market as a self-regulating system is effective only in the presence of competition.

3) competition acts as a control system for the efficiency of private entrepreneurship. Competition tests a business to determine its compliance with the public interest. Not all enterprises pass this test; as a result of competition, ineffective structures are continuously culled, i.e., a certain part of business entities is forced to leave the “field of economic play.”

4) competition creates interest in improving economic resources, their production combinations, reducing costs per unit of output, and scientific and technical renewal of production. For example, the monetary income of many people is associated with the supply of an economic resource such as labor ability. Attracting a particular employee, the price of labor services - wages - in a competitive environment depend on the quality of labor abilities. As a rule, an employee's higher competitive position brings him greater monetary income. This means that a sane person cannot help but care about the quality of his resource - labor.

Thus, competition is the basis of a market economy, a powerful incentive for economic growth, improving product quality, accelerating scientific and technological progress and reducing production costs and prices.

CONCLUSION

As a result of the analysis, we found out that competition is an economic process of interaction, interrelation and struggle between enterprises operating on the market in order to provide better opportunities for selling products and satisfying the diverse needs of customers.

The consequence of competition is, on the one hand, the aggravation of production and market relations, and on the other, an increase in scientific and technological progress.

According to the state of the market, competition is divided into perfect, imperfect and regulated.

In economics, it is customary to divide competition according to its methods into price and non-price, or competition based on price and competition based on quality.

There are four possible competitive structures that determine market structures: pure competition, monopolistic competition, oligopoly, pure monopoly.

Each of which is characterized by a number of characteristics:

Pure competition- many small firms; homogeneity of products; absence of difficulties in entering and exiting (from the industry); equal access to all types of information.

Monopolistic competition - many small firms ; heterogeneity of products ; absence of difficulties in entering and exiting (from the industry); somewhat limited access to information;

Oligopoly - a small number of large firms; heterogeneity (or homogeneity) of products; possible difficulty in exiting (from the industry); somewhat limited access to information;

Pure monopoly - the presence of one firm; uniqueness of products; an insurmountable barrier to entry; somewhat limited access to information;

Competition is a necessary and determining condition for the normal functioning of a market economy. But like any phenomenon it has its pros and cons:

1) it promotes the development of scientific and technological progress, constantly forcing the commodity producer to apply the best technologies and rational use of resources. In the course of it, economically ineffective production, outdated equipment, and low-quality goods are washed away;

2) it reacts sensitively to changes in demand, leads to cheaper production costs, slows down price increases, and in some cases leads to their reduction;

3) to a certain extent equalizes the rate of return on capital and the level of wages in all sectors of the national economy.

The negative aspects include:

1) gives business a certain instability, creates conditions for unemployment, inflation and bankruptcy;

2) leads to income differentiation and creates conditions for their unfair distribution;

3) its consequence may be overproduction of goods and underutilization of capacity during periods of production downturns.

The main conditions for the emergence of competition are:

1) ownership of means of production, product and income

2) access to resources and information

3) multiplicity of independent producers, economic independence (choice of type of activity, organizational forms, determination of sources of financing, methods and structures of production, sales management, etc.)

Market competition is a system of relations between economically independent producers (sellers) of goods and services seeking to find new ways to realize their economic interests. The conditions for its development, along with those indicated, are: the interest of subjects in profit growth, stimulation of the creation of new enterprises in monopolized industries, etc.

Bibliography

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Annex 1

Table A.1.1

Approaches to defining the term “competition”

	Source	Characteristic	Typical definitions of the term "competition"
Competition as competitiveness of the market	Russian literature	Based on the everyday understanding of competition as competition to achieve the best results in any field	A) Competitiveness of economic entities, entrepreneurs, when their independent actions effectively limit the ability of each of them to influence the general conditions of circulation of goods in a given market and stimulate the production of those goods that are required by the consumer; B) competition in the market in the absence of a monopoly; C) adversarial, competitive relations between two or more economic entities, manifested in the form of the desire of each of them to beat the others in achieving a common goal, to obtain a higher result, to push aside the opponent; D) competition between participants in the market economy for the best conditions for the production, purchase and sale of goods.
Competition as an element of the market mechanism that allows you to balance supply and demand	Classical economic theory	Competition acts as a force that ensures the interaction of supply and demand, balancing market prices. As a result of competition between sellers and buyers, a common price is established for homogeneous goods and a competitive form of supply and demand curves.	A) A. Smith interpreted competition as a behavioral category when individual sellers and buyers compete in the market for more profitable sales and purchases, respectively. Competition is the same “invisible hand” of the market that coordinates the activities of its participants; B) Competition is a mechanism for regulating the proportions of social production.
Competition as a criterion by which the type of industry market is determined	Modern theory of market morphology	Competition is understood as a certain property of the market. Depending on the degree of perfection of competition in the market, various types of markets are distinguished, each of which is characterized by a certain behavior of economic entities	Competition is not rivalry, but rather the degree to which general market conditions depend on the behavior of individual market participants.

Appendix 2

Table A.2.1

Competition classification

Classification approach	Competition Classifications
By degree of product differentiation	Homogeneous, homogeneous (without differentiation) Heterogeneous, heterogeneous (with differentiation)
By degree of free penetration into the industry	Open Closed Semi-closed
By the degree of influence on a company’s choice of a particular market	Functional (arises because any need can be satisfied in various ways. And, accordingly, all products that provide such satisfaction are functional competitors) Specific (consequence of the fact that there are goods intended for the same purpose in some important parameters that differ) Subject-specific (the result of the fact that firms produce essentially identical goods, differing only in workmanship or even the same in quality).
According to the degree of antagonism	Competition without extremes In violation of current legislation
According to market conditions	Perfect competition Imperfect competition Regulated competition
By way of rivalry	Price competition Non-price competition

Keywords

COMPETITION / PERFECT COMPETITION / IMPERFECT COMPETITION/MONOPOLY/ MONOPOLY POWER / INTRA-INDUSTRY COMPETITION / INTERINDUSTRY COMPETITION / UNFAIR COMPETITION

annotation scientific article on economics and business, author of the scientific work - Kazhuro N.Ya.

The essence of competition is shown as an objective pattern of development of commodity production based on private ownership of the means of production and commodity exchange. The economic basis of the market economy (private property) is shown, which gives rise to the corresponding production goal. This goal is to maximize profits and minimize costs of market entities. Therefore, the struggle for the most favorable conditions for the production and sale of goods in such conditions is inevitable; it appears on the surface of a society with a developed market economy as competition. Competition is considered not as an exogenous factor influencing the market economic system from the outside, but as an objective phenomenon inherent in the market economic system as such, which is due to the economic isolation of individual commodity producers. Being an important engine of a market economy, competition does not establish its laws, but acts only as an “executor” of data, laws inherent in commodity production and, above all, the law of profit maximization, which determines the goal and driving motive of economic entities in the economy. In a market economy, competition plays a contradictory role. On the one hand, it forces manufacturers to constantly strive to reduce costs in order to increase profits. As a result, labor productivity increases, production costs decrease, and the company is able to reduce retail prices for its products. Consequently, by increasing production efficiency, competition acts as a potential factor in lowering prices. On the other hand, in conditions imperfect competition sellers have more freedom to set prices because they sell their products under conditions of monopolistic competition or oligopoly. This is the main weakness of the market economic system.

Related topics scientific works on economics and business, author of the scientific work - Kazhuro N.Ya.

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Competition as market mechanism

The essence of a competition as an objective law for the development of the commodities production based on private owner-ship of the means of production and commodity exchange has been revealed in the paper. The paper presents an economic basis of market economy (private ownership) which generates a corresponding production objective. Such purpose is a maximization of profit and a minimization of market subject expenses. Therefore, a struggle for the most favored conditions on commodity production and sales is inevitable in such a situation. The struggle is considered in the community with developed market economy as a competition. The competition is regarded not as an exogenic factor exerting its influence on the market economic system from the outside, but as an objective phenomenon which is inherent to the management market system in itself. Such treatment is substantiated by economic disintegration of individual commodity producers. Being an important engine of market economy, the competition does not establish its laws, and its role is to be an executive of data which are internally inherent in commodity production laws and firstly it concerns a profit maximization law which defines a purpose and guiding motif of economic entities in the given economy. The competition plays a contradictory role under conditions of market economy. On the one hand, it makes manufacturers constantly to strive to expense reduction for the sake of profit increase. This has resulted in labor productivity increase, production cost decrease and a company receives an opportunity to reduce retail price for its products. Consequently, the competition acts as a potential factor for lowering of prices while increasing production efficiency. On the other hand, sellers have more freedom in price fixing under conditions of imperfect competition as they sell their products under the conditions of a monopolistic competition or an oligopoly. This is the main weakest point of the market economy system.

The essence of competition is the constant search for better conditions for both the consumer and the seller.

For all participants in market relations, competition is an objectively forced phenomenon, but, first of all, it is such for producers of goods and services. The realities of competition force enterprises to introduce new production technologies, increase labor productivity, and maintain or reduce product costs. In other words, competition helps reduce production costs, save resources, and forces the most rational combination of the factors of production used.

In conditions of healthy market competition, the activities of any economic entity are subject to double control - internal and external. Indirect external control by competitors is cruel and impartial. The competitiveness of an enterprise is ultimately assessed by the consumer, giving preference to the goods and services of one or another participant in the competition.

In economic theory, there is more than one definition of the concept of competition.

Classical political economy defines competition as competition for profit. Also in the economic literature, competition refers to the relations of enterprises in the context of comparing the results of their economic activities.

Competition is a complex, multi-valued and multifunctional category. It ensures normal development, self-regulation and functioning of the market.

Functions of competition

Competition in a market economy performs the following functions:

• Regulation. To win the competition, the manufacturer must offer goods and services that are in priority demand among the buyer. Production factors, under the influence of prices, are redistributed to industries that need them most.
• Motivation. Manufacturers who offer high-quality products at the best price, that is, manufactured at the lowest cost, make a profit, which becomes an incentive for technical progress. Enterprises that do not respond to consumer needs and violate the rules of competitive rivalry incur losses and can be completely forced out of the market.
• Distribution. Competition not only stimulates increased productivity, but also promotes a fair distribution of income among its participants, depending on the effective contribution of each.
• Control. Thanks to competition, the economic influence of each economic entity is limited. The buyer can choose among several sellers. And if we are talking about the price of a product or service, then the cleaner (more perfect) the market competition, the fairer the final price for the consumer.

Classification

Competition is classified according to different criteria.

By scale of development

• individual (between specific market participants);
• local (in a certain territory);
• industry (within one industry);
• intersectoral (between different market sectors);
• national (within one country);
• global (on the world market).

By the nature of development

• price (manifests itself when prices for services or goods are artificially reduced);
• non-price (consists in improving the quality of the product, modernizing production technologies, introducing innovations and manifests itself in attempts to produce a fundamentally new product or improve an existing one).

Depending on the fulfillment of the prerequisites for competitive balance in the market

• perfect (based on the fulfillment of the prerequisites of competitive balance and assumes the presence of a large number of independent producers and buyers);
• imperfect (based on a violation of the prerequisites of competitive balance and involves division of the market between several producers (oligopoly) or a complete monopoly).

Depending on the needs that a particular product satisfies

• horizontal (rivalry between manufacturers of identical goods);
• vertical (the struggle between manufacturing firms of different goods that satisfy the same needs).

Competition in economics is a complex and multifaceted concept. It performs many functions: it promotes self-regulation of the market, improves the quality of goods and services, reduces production costs, and creates better conditions for both producers and consumers of goods and services.

Back forward

Attention! Slide previews are for informational purposes only and may not represent all the features of the presentation. If you are interested in this work, please download the full version.

Class: 10

Equipment: interactive whiteboard (screen), teacher's computer, Microsoft Office PowerPoint 2003, presentation, scales with two bowls, paper weights.

Lesson objectives:

• educational: determine the economic significance of competition, characterize the types of competition, identify the advantages and disadvantages of competition;
• developing: develop the ability to think independently, logic, apply previously studied material to master new material;
• educating: to cultivate in students the ability to independently acquire knowledge, responsibility, and attention.

During the classes

1. Organizational stage

Teacher: "Hello. Today you and I have to study quite a lot of material, so I ask everyone to get ready for intensive work.” (Each student is given a worksheet in advance; slide No. 1 on the board).

2. Updating knowledge

Teacher: “The modern market economy is a complex organism, consisting of a huge number of diverse production, commercial, financial and information structures, interacting against the backdrop of an extensive system of legal business norms, and united by a single concept - the market. Today in class we will look at a key concept that expresses the essence of market relations. Your task is to determine the topic of the lesson after listening to the parable from the famous book “Cash Flow Quadrant” by Robert Kiyosaki.” (then the teacher tells a parable)

3. Learning new material

Teacher: “So, what economic concept is described in this situation ( students: “rivalry") and the topic of our lesson: (students: “Competition”). There are many statements about this concept, for example: Evin Cannan believes that “economic competition is not war, but competition in each other’s interests. This is an incentive for business development.” But Anthony de Mello in the collection “One Minute of Stupidity” wrote that competition is the source of universal evil, it brings out the worst in you, because it teaches you to hate. How many people, so many opinions. Tell me, in order to agree with them or refute them, what we need to do in class (students: “identify the economic significance of competition, determine the advantages and disadvantages of competition”). To do this, we will consider the following questions in class: 1) Competition: definitions and functions; 2) Types of competition; 3) Advantages and disadvantages of competition. Let's move on to consider the first question. We have already encountered this concept while studying types of economic systems. Therefore, try to define the concept of “competition” based on previously acquired knowledge. (students offer their options, then the material is summarized by the teacher). Competition– (from Lat. Concurrere – to collide) – the struggle of independent economic entities for limited economic resources. A. Smith interpreted competition as a behavioral category when individual sellers and buyers compete in the market for more profitable sales and purchases, respectively. Competition performs the following functions in the economy: regulation, motivation, distribution, control (students are asked to correlate the name of the function with the description of reality, slide 7) The results of the activities of any company strongly depend not only on its costs, but also on the type of competition that it has to face when selling your goods. Those. We move on to the second question: Types of competition. Your task is to identify the main types of competition along the way and enter their distinctive features into a table (see appendix), which you will submit for testing at the end of the lesson.”

The teacher shows an example of the type of competition on the board, and the students independently, using the existing criteria, determine the main characteristics. The table is checked (students name their options).

Teacher: “To consolidate this material, I suggest you work with the following exercise; your task is to read carefully and answer the questions, justifying your answer (see appendix).

After consolidating the material on the second question, students are asked to vote “for” or “against” the statement: “Competition is a business driver.” Each student places a paper weight on the scale “For” or “Against” the competition, while justifying their answer.

The answers may be as follows:

Advantages:.

1. Promotes more efficient use of resources;

2. Causes the need to react flexibly and quickly adapt to changing production conditions;

3. Creates conditions for the optimal use of scientific and technical achievements in the field of creating new types of goods, etc.;

4. Provides freedom of choice and action for consumers and producers;

5. Aims manufacturers to meet the diverse needs of consumers and improve the quality of goods and services.

Flaws:

1. Does not contribute to the conservation of non-renewable resources (animals, minerals, forests, water, etc.);

2. Negatively affects the environment;

3. Does not ensure the development of production of goods and services for public use (roads, public transport, etc.);

4. Does not create conditions for the development of fundamental science, the education system, and many elements of the urban economy;

5. Does not guarantee the right to work (stimulates unemployment), income, rest;

6. Does not contain mechanisms that prevent the emergence of social injustice and the stratification of society into rich and poor.

4. Consolidation of the studied material

Students are asked to complete a test (see appendix)

Summing up the lesson

Each of you has already received a grade for the test, you have seen how much you have mastered the new material, but I would like you to answer the following questions at the end of the lesson:

• What economic term was discussed in this lesson?
• What goal was set for us? Have we reached it?
• What did you like/dislike about the lesson?
• Can you evaluate your work in class? (you are asked to fill out an assessment sheet, see application)

Homework: paragraph 7.1 (fundamentals of economic theory /edited by S.I. Ivanov); give examples of industry markets in the Ramensky district for each type of competition.

Competition (Latin concurrere - compete) is rivalry between participants in a market economy for the best conditions for the production, purchase and sale of goods. Such an inevitable clash is generated by objective conditions: the complete economic isolation of each market entity, its complete dependence on the economic situation and confrontation with other contenders for the greatest income.

The struggle of private commodity owners for economic survival and prosperity is the law of the market.

The essence of competition is also manifested in the fact that it... on the one hand, it creates conditions for which the buyer on the market has a great variety of opportunities to purchase goods, and the seller - to sell them. On the other hand, two parties take part in the exchange, either of which puts its own interests above the interests of the partner. As a result, both the seller and the buyer, when concluding an agreement, must make a mutual compromise when determining the price, otherwise the agreement will not take place, and each of them will suffer losses.

An indispensable condition for competition is the independence of the subjects of market relations from certain “superior” and external forces. This independence is manifested, firstly, in the ability to independently make decisions about the production or purchase of goods or services; secondly, in the freedom to choose market partners. In In the process of competition, economic entities seem to mutually control each other.Competition is also an important tool for regulating the proportions of social production in market conditions.

The following functions of competition are distinguished:

identifying or establishing the market value of goods;

equalization of individual costs and distribution of profits depending on various labor costs;

regulation of the flow of funds between industries and productions.

There are several types of competition. Let's consider the classification of types of market competition according to a number of criteria.

Types of competition by scale of development

Based on the scale of development, the following types are distinguished:

individual (one market participant strives to take his place in the sun - to choose the best conditions for the purchase and sale of goods and services);

local (among commodity owners of a certain territory);

sectoral (in one of the market sectors there is a struggle to obtain the greatest income);

intersectoral (competition between representatives of different sectors of the market to attract buyers to their side in order to extract more income);

national (competition of domestic commodity owners within a given country);

global (the struggle of enterprises, business associations and states of different countries in the world market).

According to the nature of development, competition is divided into free and regulated. Competition is also divided into price and non-price.

Price competition occurs, as a rule, by artificially driving down prices for a given product.

Non-price competition is carried out mainly through improving product quality, production technology, innovation and nanotechnology, patenting and branding and the terms of its sale, “servization” of sales.

Types of competition depending on the fulfillment of the prerequisites for competitive market equilibrium

We can distinguish between perfect and imperfect competition.

Perfect competition is competition based on the fulfillment of the prerequisites of competitive equilibrium, which include the following: the presence of many independent producers and consumers: the possibility of free trade in factors of production; independence of business entities; homogeneity, comparability of products; Availability of market information.

Imperfect competition is competition based on a violation of the preconditions of competitive equilibrium. Imperfect competition has the following characteristics: division of the market between several large firms or complete dominance: limited independence of enterprises; product differentiation and control over market segments.

Types of competition depending on the relationship between supply and demand (goods, services)

The following types of competition can be distinguished (varieties of perfect and imperfect competition):

• oligopolistic:

  monopolistic.

Pure competition is an extreme case of competition and is a type of perfect competition. The key characteristics of a purely competitive market are: a large number of buyers and sellers with little power to influence prices; undifferentiated.

Oligopolistic competition is imperfect competition. The key characteristics of an oligopolistic competition market are: a small number of competitors creating a strong relationship; greater bargaining power: the strength of a reactive position, measured by the elasticity of a firm's responses to competitors' actions; similarity of products and limited number of standard sizes.

Monopolistic competition is competition of an imperfect form. The main characteristics of the monopolistic competition market: the number of competitors and the balance of their forces; product differentiation

Types of competition depending on the ratio of the number of business entities regarding the investment of capital in the field of production or sales

There are intra-industry and inter-industry types of competition.

Intra-industry competition is competition between industry entities for more favorable conditions for production and sales of products, and obtaining excess profits. Intra-industry competition is the starting point in the competition mechanism. Main functions of intra-industry competition:

the possibility of establishing the social, market value of a product and the market equilibrium price;

stimulation of scientific and technological progress;

economic coercion to increase production efficiency;

identifying weak, less organized producers;

limiting the economic power of leaders.

Interindustry competition is competition between entrepreneurs in different industries for a more profitable application of capital based on the redistribution of profits. The emergence of inter-industry competition is based on unequal production conditions (different capital structure and speed of its turnover, fluctuations in market prices), leading to different rates of profit.

Main functions of inter-industry competition:

the possibility of modernizing industries, as new enterprises are created on a progressive scientific and technical basis:

increased intensification, increased production efficiency;

optimization of industry proportions, structural restructuring of the economy.

Types of competition in accordance with the need underlying the product

Horizontal and vertical types of competition can be distinguished.

Horizontal competition is competition between producers of the same type of product. It is a type of intra-industry competition, i.e. competition regarding the best production of functional properties and parameters of the product.

Vertical competition is competition between manufacturers of different goods that can satisfy the same customer need. For example, with the help of a TV you can satisfy the need for information, leisure, education, etc.

Types of competition depending on the relationship between supply and demand for a specific product

The following types of competition are distinguished, which are varieties of intra-industry competition: competition between sellers of goods and competition between buyers of goods.

The higher the degree of competition among sellers, the lower the degree of competition between buyers and vice versa. The vectors of action of these two trends are opposite, their impact on society is the same, so there is a certain balance between them. When the demand and supply curves interact, a period of relative equilibrium arises, which has three phases: short-term. medium and long. In short-run equilibrium, price is determined by demand. As the time period lengthens, the price is already determined by the cost, i.e. costs.