Imperfect competition: monopoly, oligopoly, monopolistic competition.

One of the fundamental features of the market is competition, and it is traditional to divide industries into categories according to the degree of competition that exists between the firms within the industry.

Competitionis a market condition when there is more thanone producer of a specific good or service and consumers are free to choose which product to buy. On the one hand, producers want to maximize profits by selling as much as possible at high prices. On the other hand, buyers having budget constraint want ‘the most for the money’. Thus, producers, in order to compete successfully among other producers, seek to use resources efficiently. Thus competition is a market mechanism which encourages technological innovation, modernization, and rationalization.

It is traditional to divide industries into categories according to the degrees of competition: that exists between the firms within the industry. There are four such categories: perfect competition, monopolistic competition, an oligopoly, and a monopoly, the latter three representing imperfect competition. To distinguish between these four categories, the following must be considered:

Competition – is an element of market economy, it is the rivalry between participants of economic market, and it is the struggle for the sources of raw materials, for the market, profitable conditions of enclosure the capital, for a big profit share.

Competition has its place among entrepreneurs, undertakings, firms and also among industries, territories and states. The liberty of price formation creates right conditions for competition between economic subjects. But markets fulfill the guiding function only in case of economic competition exist- the rivalry of producers for the biggest income, and that reduces to social and economic instability of producers’ positions.

Competition is a typical for commodity production struggle between producers for the most beneficial conditions of production and sales of goods and for the greater profit. The essence of competition is vividly revealed in its positive and negative features

a) Positive and negative features of competition.

Positive characteristics:

- competition is an important moving force of economic system development; it assist science-technical progress of society;

- competition stimulates the decrease of production costs by economizing of resources, the increase of labour productivity, improvement of labour discipline;

- it makes producers improve the quality of goods, its assortment and customer care;

- it stimulates cash flow between branches as a result of the maximum profit chase, thus activating the implementation of economic reforms in economy;

Negative characteristics:

- it strengthens the process of production concentration which leads to the appearance of monopolies;

- as a result of the struggle for sales markets producers expand their production, manufacture an excessive number of goods that leads to the crisis of re-production;

- it strengthens the struggle between capitalists for the reduction of expenditures on production by decreasing of salaries that in its turn reduces solvent demand of population;

- competition provokes employees’ intense labour that results in increase of unemployment which negatively influences workers’ standard of living;

- the use of unfair methods of competition by large-scale companies leads to the destruction of small and middle-sized enterprises, their mass bankruptcy;

- international competition, from the side of multinational corporations is done by way of bribery and prevents national producers in other countries.