These two concepts of economy are connected so that in a row a case act as direct antonyms each other. The concept of the competition and monopoly of the economic theory is studied very deeply and in detail. To understand essence of the market relations, it is necessary to consider an ideal market model – the perfect competition in lack of monopoly. Its main signs:
- Goods, identical on properties, from different producers are presented at the market. In this case as a reference point for the buyer serves products cost. Regulation of demand for goods happens by variation of the prices.
- The number of participants of the market is limited to nothing, there are no barriers to the introduction in the market relations and an exit from them.
- Nobody can influence the market value of goods. The producer sells so much products how many he can realize at the operating cost.
- All participants of the market are informed on the level of demand and the offer, the prices, rates of return.
- Lack of brands that makes sellers equal before buyers.
- The mobility of resources influencing alignment of the prices.
Both the competition, and monopoly are peculiar to the modern market. Models of the perfect market cannot be met in the modern world therefore in most cases it is about the imperfect competition.
Comparison of monopoly and competition
Unlike freely competing, the following signs are peculiar to the monopolistic market:
- In the market there is only 1 seller offering unique goods. Example: goods, essentially new on the properties.
- The seller individually exercises control of the prices, deliveries of products. The competition in the conditions of monopoly is impossible as the seller does not agree with the price, and dictates it.
- For competitors of the monopolist absolute obstacles on occurrence are built to the market. The interrelation of the competition and monopoly in this case is traced thus: the monopolization is higher, the it is less than competitive opportunities in the market. Thus, we come to a conclusion that the perfect competition and pure monopoly – concepts, opposite, but they are a certain standard for comparison of other forms of the market.
- Existence of deficiency is peculiar to the market in the conditions of monopoly.
Concept of the competition and monopoly: natural and artificial barriers
In modern market conditions the monopolization cannot be perceived only as the enemy of buyers and, perhaps, societies in general. In a row a case the monopoly is simply necessary, thus there are natural monopolists. It is possible to give the gas enterprises, the organizations of water supply, the communication line as an example. In most cases the similar companies belong to the state which controls their work.
For what necessary natural monopolies? For economy of resources as the large organization has a number of competitive advantages before smaller: low costs, big power and technical equipment, high performance of work, etc.
Artificial monopolies are a condition of the market where to competitors the entrance on the market is complicated by existence of special barriers. It is possible to give issue of licenses and patents as an example. Having patented the know-how or an invention, the company exposes the ban all to other participants of the market to use this decision or an innovative product in the production. So it gets indisputable advantages in the form of decrease in prime cost of goods, forcing out, thus, competitors.
Both the competition, and monopoly is necessary for normal functioning of any market, but only if it is about natural market monopolization.