Types of competition.

a) Competition can be intrabranch and interbranch:

- Intrasectoral competition is a struggle between producers who are involved in one sphere of economy. It results in leveling of individual costs according to social or market cost which is the basis of market price.

- Intersectoral competitionis a struggle between firms and enterprises of different branches for maximum profit. The object of interbranch competition is a surplus product obtained as a result of re-allocation according to the cash flow from one branch to another.

b) There are price, non-price and non-economic types of competition:

- Price competition is a price manipulation in different markets, price decrease without any change of quality of goods, price discounts and discrimination in prices.

- Non-price competitionis competition by means of quality improvement, perfection of guarantee service and better organization of sales.

- Non-economic competitionmeans the use of secret agreements concerning sales market division, takeover of enterprises and industrial espionage etc.

b) Methods of competition - first of all it is the improvement of quality of goods and services, fast renewal of assortment, design, guarantee giving, timely price reduction etc.

a) Perfect competition market model, its characteristics.

Definition: Perfect competition is competition characterized by a great number of producers-competitors and buyers-competitors and by a free access of producers to any type of activity. Its peculiar features are:

- availability of many enterprises, producing homogeneous goods;

- a small size of a producing enterprise in the respect of the market;

- free access to the market;

- buyers and producers’ adaptation to the existing prices and their being as price receivers.

b) Imperfect competition market model, its characteristics.

Competition at which at least one of the signs of perfect competition is violated is called imperfect competition.

Definition: Imperfect competition is competition between large-scale, small and middle-sized companies. It is a struggle for the monopolization of sales markets, sources of raw materials, energy, state contracts obtaining, intellectual property possession etc. Its peculiar features are:

- the establishment of monopoly high prices;

- acquiring monopoly high profits on the basis of high prices.

c) Submodels of imperfect competition market.

It includes 3 market submodels: monopoly, oligopoly and monopolistic competition.

- An extreme case is a pure monopoly when only one enterprise dominates in some branch. The defining moment at this is not a size of the enterprise, but its share of production and sales on the market. Being the only seller, monopoly suggests a unique production which doesn’t have any substitute. Monopoly is protected from indirect by high entrance barriers to the branch. It can be connected with the economy of scale, with natural monopoly when an enterprise (in the sphere of hydro- or gas provision) gets privileges from government. Monopoly defines prices.

- Market structure in which a small number of sellers occupy a major position in some branch, and the entrance to the branch of new producers is limited by high barriers is called oligopoly. The characteristic feature of oligopoly is oligopoly connection: every enterprise-producer should take into account not only the interests of consumers but also the ones of other firms-producers of the market. The is the so called leadership in price determining, i.e. a secret agreement on prices. Oligopoly pricing is often done on the principle “expenditures plus”, when some definite per cent is added to average expenditures while price defining.

- On the market of monopolistic competition a great number of producers are engaged in production and distribution of goods. Every enterprise is relatively small in volume of production and sales. An important characteristic of monopolistic competition is product differentiation both real and false one, that is done by means of advertising, the use of trade marks etc. As the production of every enterprise is unique in the eyes of consumers, such market tends to acquire the traits of monopoly.

Monopolistic competitionis based on the fact thatconsumers may have preferences for different brands; so producers can sell products at higher prices than equilibrium. However, the control over the market is limited: if a price is too high, consumers can buy a good from another producer.

An oligopoly is a degree of competition when the market is dominated by a few large producers. Each firm is large enough to influence the price and entry of new firms is restricted.