federal agency of Education
State educational institution
higher professional education
"OMSK STATE TECHNICAL UNIVERSITY"
Department: Communications and information security
Abstract on the discipline "Economics"
Topic: Competition, its place and role in the modern market economy
Is done by a student:
Kuzyukov Viktor Vasilievich
Group: ZRP-318 (210402)
Option: No. 10
Checked by teacher:
Omsk 2011
Introduction
1. Types of competition
2. Methods of competition: price and non-price. Market and non-market forms
Conclusion
Bibliographic list
Introduction
If we consider what the term "Competition" means, then the most general definition will sound like:
Competition (lat. concurrentia, from lat. concurro - running away, colliding) - struggle, rivalry in any area.
Competition exists in many areas and in every area, also not excluding the economy, it cannot be limited to just one definition, so I will give even more detailed and close to economics:
Competition is the center of gravity of the entire system of a market economy, a type of relationship between producers regarding the establishment of prices and volumes of supply of goods on the market. The stimulus that motivates a person to compete is the desire to surpass others.
Competition is a dynamic, accelerating process. It serves to better supply the market with goods.
Competition is an element market mechanism, providing interaction market entities in the production and marketing of products, as well as in the field of capital investment.
Competition (from the Latin "concurrere" - collide) means rivalry between individual subjects of the market economy for the most profitable terms production and sale (purchase and sale) of goods.
Competition is the engine of economic progress. This is explained by the fact that market rivalry leads to success if the entrepreneur cares not only about maintaining, but also expanding his production, for which he strives to improve technology and organization, improves the quality of goods, reduces the cost of producing a unit of output, and thereby has the opportunity to reduce prices, expand the range of goods, improve trade and after-sales customer service.
As you can see, the concept of competition is so ambiguous that it is not covered by any universal definition. This is both a way of managing, and such a way of existence of capital, when one capital competes with another capital. Competition is seen as the main essential feature, property of commodity production, as well as a method of development. In addition, competition acts as a spontaneous regulator of social production.
Societies that rely on competition are more successful than others in achieving their goals and that it is competition that shows how to produce things more efficiently. It contributes to the displacement of inefficient enterprises from production, the rational use of resources, and prevents the dictate of producers in relation to the consumer. This is the undoubted positive role of competition in social development and the effectiveness of competitive markets.
But the competition is far from idyllic. At all times, the deep roots of competitive relations have been the need for a constant struggle for Better conditions existence. As a result of this struggle, there were not only winners - happy rivals who increased their wealth, but also defeated ones. Competition is associated with such negative aspects of its manifestation as ruin, impoverishment of a certain part of the population, unemployment, instability, differentiation, social injustice, inflation, the formation of monopolies, etc.
The inability to influence the price is key point in the modern interpretation of the concept of competition. Joseph Schumpeter argued that, at least in terms of economic growth, competition is a rivalry between the old and the new: new products, new technologies, new sources of supply, new types of organization.
Today it is clear that the fiercer the competition in the domestic market, the better prepared national firms are to fight for markets abroad, and the more advantageous position is for consumers in the domestic market both in terms of prices and product quality. After all, competitive products should have such consumer properties that would favorably distinguish them from similar products of other competitors.
With the transition of Russia to market methods management role of competition in economic life society has grown significantly. At the same time, maintaining a competitive environment in the Russian Federation, as in all developed countries at the present time, has become an important task of state regulation of the economy. This means that the study of competition, its role in the development of market relations is currently the most important task of economic research in our country.
1. Types of competition
There is competition:
functional (this is the competition of a certain product);
Functional competition arises from the fact that any need can be satisfied in a variety of ways. For example, for sports or intellectual games - these are chess, checkers, backgammon, cards, etc.; for tourism - boats, bicycles, cars, etc.
Species (price and quality);
Specific competition arises due to the presence of goods intended for the same purpose, but having differences in some important characteristics. For example, tape recorders with different output power levels.
Intercompany (among individual enterprises, firms);
Intercompany competition - the struggle between enterprises of the same or different industries for a limited amount of effective demand. Occurs between enterprises that produce goods or provide services that are related to intergeneric, intergroup, intragroup and intercompany competitive goods. An example is the enterprises of the clothing industry that produce clothes, as well as ateliers for tailoring.
Intra-industry and inter-industry.
Intra-industry competition, one of the types of capitalist competition, a specific form of antagonistic rivalry and struggle between individual commodity producers, capitalist entrepreneurs, joint-stock companies, monopoly unions of capitalists employed in the same branch of the economy.
Intersectoral competition, one of the types of capitalist competition; a specific form of struggle between individual capitalists, joint-stock companies and monopoly associations. Social capital is a process of transfer of capital from one branch to another, due to which the proportions of the reproduction of social capital are spontaneously formed.
Depending on the ratio between the number of producers and the number of consumers, the following types of competitive structures are distinguished:
a) a large number of independent producers of some homogeneous product and a mass of isolated consumers of this product. The structure of relations is such that each consumer, in principle, can buy a product from any manufacturer, in accordance with own assessment the usefulness of the product, its price and its own possibilities of acquiring this product. Each producer can sell goods to any consumer, according to his own benefit. None of the consumers acquires any significant share of the total demand. This market structure is called polypoly and gives rise to the so-called perfect competition.
b) a huge number of isolated consumers and a small number of producers, each of which can satisfy a significant share of the total demand. Such a structure is called an oligopoly and gives rise to so-called imperfect competition. The limiting case of this structure, when a mass of consumers is opposed by a single producer capable of satisfying the total demand of all consumers, is a monopoly. In the case when the market is represented by a relatively large number of producers offering heterogeneous (heterogeneous) products, then they speak of monopolistic competition;
c) the only consumer of the goods and many independent producers. At the same time, a single consumer acquires the entire supply of a product that is supplied by the entire set of producers. This structure gives rise to a special type of imperfect competition called monopsony (monopoly of demand);
d) the structure of relationships, where a single consumer is opposed to a single producer (bilateral monopoly), is not competitive at all, but it is also not a market one.
Competition in its content is very controversial. On the one hand, it expresses the desire for freedom, economic independence - this is a manifestation of centrifugal forces. On the other hand, the desire of the competitors themselves to protect themselves from the vicissitudes of the struggle, which indicates a centripetal tendency to pool efforts, a kind of economic solidarity, the guarantor of which is the state, the laws of behavior in the market that protect the interests of national entrepreneurs from the competition of foreign capital, etc. Moreover, the desire to win in the competition leads to the establishment of a dominant position in the market, the seizure of market power, to the formation of monopolies. Competition and monopoly are not two different mutually negating economic forces, but two sides of the same market interaction.
2. Methods of competition: price and non-price.
Market and non-market forms
monopoly oligopoly monopsony competition
Competition is conducted for a limited amount of solvent demand. It is the limited demand that makes firms compete with each other. After all, if the demand is satisfied by the product and / or service of one company, then all the others automatically lose the opportunity to sell their products. And in those rare cases where demand is virtually unlimited, relationships between firms offering the same type of product are often more like collaboration than competition. Such a situation, for example, was observed at the very beginning of reforms in Russia, when a small number of goods that began to arrive from the West faced an almost insatiable domestic demand.
Competition can be conditionally divided into fair and unfair.
The main methods of fair competition:
improvement of product quality,
development of pre- and after-sales service,
· Creation of new goods and services and use of scientific and technological achievements, etc.
The main methods of unfair competition:
economic (industrial espionage);
counterfeit products of competitors;
bribery and blackmail;
Deception of consumers;
currency fraud;
hiding defects, etc.
Market competition develops only in accessible market segments. Therefore, one of the common techniques that firms resort to to ease the pressure on themselves from the competitive pressure is to move into market segments that are inaccessible to others. All these are means of competition and at the same time means of avoiding it.
In the economic literature, it is customary to divide competition into:
price (competition based on price);
non-price (competition based on the quality of use value).
Price competition dates back to the days of free market rivalry, when even homogeneous goods were offered on the market at the most varied prices.
Price reduction was the basis by which the manufacturer (merchant) distinguished his product, attracted attention and, ultimately, won the desired market share.
In the modern world, price competition has lost such importance in favor of non-price methods of competition. This does not mean, of course, that the "price war" is not used in the modern market, it exists, but not always in an explicit form. The fact is that "a price war in an open form is possible only until the company exhausts the reserves for reducing the cost of goods. In general, price competition in an open form leads to a decrease in the rate of profit, a deterioration in the financial condition of firms and, as a result, to For this reason, firms avoid open price competition, which is currently used usually in the following cases:
· by outsider firms in their fight against monopolies, for competition with which, in the field of non-price competition, outsiders have neither the strength nor the opportunity;
to enter markets with new products;
· to strengthen positions in the event of a sudden aggravation of the sales problem.
With hidden price competition, firms introduce a new product with significantly improved consumer properties, but raise the price disproportionately little.
Non-price competition highlights the use value of the product, which is higher than that of competitors (firms produce goods of higher quality, reliable, provide a lower consumption price, more modern design).
The pre-sales and after-sales service of the buyer plays an important role. the constant presence of manufacturers in the consumer service sector is necessary. Pre-sales service includes meeting the requirements of consumers in terms of supply: reduction, regularity, rhythm of deliveries (for example, components and assemblies). After-sales service - the creation of various service centers for servicing purchased products, including the provision of spare parts, repairs, etc.
Due to the large impact on the public funds mass media, press, advertising is the most important method of competition. With the help of advertising, you can in a certain way form the opinion of consumers about a particular product, both for the better and for the worse.
Another type of non-price competition is product differentiation. That is, offering a wide range of types, styles, brands of a given product. At the same time, the range of free choice is expanding, and the variety and shades of consumer tastes are more fully satisfied. It is true that there is a danger that the expansion of the product range may reach a level where the consumer becomes confused, smart choices become difficult and purchases become time-consuming.
Each firm has a product that currently differs from competitors' products. Any product has its own reserves for its further change and development. Therefore, very often, in addition to launching new products on the market, manufacturers use a modification policy, i. change in the most essential technical and operational properties, quality of goods, change in external design or form of packaging. Thanks to this, the company can change the image of the product, orient it to new sales segments.
Product improvement gives a firm a long-term advantage. The entry into the market of higher quality products or new use value makes it more difficult for a competitor to respond. The "formation" of quality goes through a long cycle, starting with the accumulation of economic, scientific and technical information.
Illegal methods of non-price competition include:
industrial (economic) espionage;
enticement of specialists who own trade secrets;
release of counterfeit goods, outwardly no different from original products, but significantly worse in quality, and therefore usually much cheaper;
fraud with business reporting;
hiding defects, etc.
The main targets of industrial espionage are patents, blueprints, trade secrets, technologies, cost structure; economic espionage, in addition to industrial secrets, covers macroeconomic indicators and includes intelligence natural resources, identification of industrial stocks; in connection with the development of marketing, the collection of information about the tastes and incomes of various social groups in society is of great value.
All industrial monopolies have secret laboratories where they compare the levels of technical solutions, quality, performance and reliability of their products with similar products of competitors in all respects. In these laboratories, each unit and assembly of their own machines and similar products of competitors is disassembled in order to objectively compare them and reveal the real value of a particular product. All the disadvantages or advantages of their own and other people's goods are taken into account. All the best from competitors is adopted and adapted for their machines, mechanisms and structures, if it is possible to bypass patent laws or if it is beneficial to the company.
Along with well-known methods, modern industrial espionage uses the latest achievements of science and technology. Very often, various kinds of microscopic devices based on various electronic circuits began to be used.
A special technology makes it possible to intercept any information transmitted orally, via telephone, telefax, computer. Window panes can serve as microphones: by their vibration, special devices restore the picture of the conversation. The use of electronic technology provides the special services of monopolies, as well as the special services of states, with the opportunity to receive the necessary information about the state of affairs of competitors, their negotiations, etc.
Another effective way of economic espionage is the introduction of "one's own person" into government bodies designed to regulate the activities of industrial monopolies, which allows you to obtain the necessary information about competitors, control actions related to antimonopoly policy, etc.
Private ownership of inventions is established through patenting. From an economic point of view, patenting is tantamount to monopolizing the benefits associated with the use of a patent.
Basically, a patent provides real benefits for seven years, which allows for a considerable profit to its owner during this time. But on the other hand, the appearance of a patent, which prohibits the use of any patented discovery directly by competitors, forces them to accelerate the development of some new techniques and technologies.
In addition, many of the largest inventions are often not patented so as not to attract the attention of competing companies. This most often refers to technologies, technical processes that are difficult to copy, in contrast to the creation of new products.
The path from invention to commercial use requires large financial, labor and material costs. Therefore, if there is no danger that the competitor will not introduce the invention faster than the corporation itself, then the invention is not patented, but if there is a risk that the invention will be used by a competitor, it is immediately patented and the competitor is forced to wait 15-20 years until the expiration of the monopoly right . The secrets of the production of certain goods are not patented so that after a certain period the technology of their manufacture is not made public. Having a patent is a powerful tool for controlling the market, because its violation is punishable by confiscation of illegally produced products, compensation for damages and the payment of large fines by the violator, up to 10 million dollars. Patents are used primarily to protect the company's products from counterfeiting or imitation of quality goods.
For firms whose products are copied, fakes have disastrous consequences: the sales market is sharply narrowed, profits are sharply reduced, going to fake manufacturers. Counterfeits undermine the credibility of the company, because. fakes, in addition to their cheapness, are also of poor quality, so fakes quickly fail, thereby worsening consumer confidence in the company whose brand has been forged.
3. Place and role of competition in the modern market economy
Since the model of perfect competition is a theoretical abstraction, everything is real. existing markets imperfect in one way or another.
Imperfect competition is defined as follows:
a market that does not meet at least one of the signs of perfect competition;
A characteristic of a market where two or more sellers, with some (limited) price control, compete with each other for sales.
Markets in which either buyers or sellers take into account their ability to influence the market price.
Imperfect competition has always existed, but it became especially acute in the late 19th and early 20th centuries. due to the formation of monopolies. During this period, there is a concentration of capital, joint-stock companies arise, control over natural, material and financial resources. The monopolization of the economy was a natural consequence of a large jump in concentration industrial production under the influence of scientific and technological progress. Professor P. Samuelson emphasizes this circumstance: “The economy of large-scale production may have certain factors that lead to the monopolistic content of business organization. This is especially evident in the rapidly changing field of technological development. It is clear that competition could not last long and be effective in the sphere of an innumerable number of producers.
Most cases of imperfect competition can be explained by two main causes.
First, there is a tendency to reduce the number of sellers in those industries that are characterized by significant economies of scale and cost reduction. Under these conditions, large firms are cheaper to produce and can sell their products at a lower price than small firms, which leads to the "crowding out" of the latter from the industry.
Second, markets tend to be imperfectly competitive when there are difficulties for new competitors to enter an industry. So-called "barriers to entry" may arise as a result of government regulation that limits the number of firms. In other cases, it may simply be too expensive for new competitors to "break through" into the industry.
In theory, there are different types of markets with imperfect competition (according to the degree of decreasing competitiveness):
monopolistic competition
oligopoly
monopoly
The market of 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 options for goods. Sellers compete by offering a differentiated product in a market where new sellers can enter. Monopolistic competition - type industry market where there are enough sellers selling a differentiated product to allow them to exercise some control over the selling price of the product. In a market of monopolistic competition, there are a relatively large number of sellers, each of whom satisfies a small share of the market demand for a common type of product sold by the firm and its competitors. Under monopolistic competition, the size of the market shares of firms averages from 1 to 10% of the total sales in this market. Entry into this market is not hampered by such barriers as under a monopoly or oligopoly, but not as easy as under perfect competition.
Real products may differ from each other in quality, properties, external design, but these differences, if any, are very small. Differences may lie in the services associated with the product. Buyers see the difference in offers and are willing to pay for goods in different ways. In order to stand out with something other than price, sellers tend to develop different offers for different market segments and widely use the practice of naming products, advertising, and personal selling methods. Due to the presence of a large number of competitors, their marketing strategies have less influence on each individual firm than in a monopoly market.
E. H. Chamberlin in the work “The theory of monopolistic competition. The Reorientation of the Theory of Value” emphasizes very clearly the peculiarity of monopolistic competition: “To say that each producer in any industry has a monopoly on his own variety of product does not mean to say that the industry is monopolized. On the contrary, very intense competition can take place within the industry, but, of course, not such as is described by the theories of pure competition - it is characterized by a monopoly on its own kind of product. ... Monopolistic competition is, of course, something different from both pure monopoly and pure competition.
He drew attention to the fact that product differentiation leads to the fact that instead of a single market, a network of partially isolated but interconnected markets is formed, there is a wide variety of prices, costs, output volumes of a particular commodity group. Differentiation does not exclude the monopoly on the product. The power of monopoly, however, does not extend to the broader class of goods of which the monopolized product is a subset. Before E. Chamberlin, the term "monopolistic competition" was used in relation to the oligopolistic structure of the market, for example, A. Pigou: "Monopolistic competition is competition between several sellers, each of which produces a significant share of all output."
An oligopoly market (oligopolistic competition) is a type of industry market characterized by the presence of several very large firms that control a significant part of production and sales and compete with each other. Consists of a small number of sellers who are highly sensitive to each other's pricing policies and marketing strategies. Each firm pursues an independent market policy, but at the same time it depends on competitors and is forced to reckon with them. The product can be both differentiated and standard. Goods can be similar (steel, aluminum) or dissimilar (cars, personal computers). The small number of sellers is explained by the fact that it is difficult for new bidders to enter this market. Each seller is sensitive to the strategy and the actions of competitors. If any steel company cuts its prices by 10%, buyers will quickly switch to that supplier. Other steel producers will have to respond either by lowering prices or by offering more services. The oligopolist is never sure that he can achieve any long-term result by lowering prices. On the other hand, if the oligopolist raises prices, competitors may not follow suit, and then he will either have to return to previous prices or risk losing customers to competitors.
It is possible to single out such a variety of oligopoly as an oligopoly with a dominant firm. She is characterized the following signs:
· The presence of a dominant firm - an agent that sells or buys a significant share of the total market volume and is capable of strategic behavior;
· The presence of a large number of outsider firms, small-sized firms that produce the same or similar goods, but are not able to influence the market price;
· The market price is set under the strong influence of the dominant firm, outsiders accept it as given by the market;
Alvin J. Dolan and David E. Lindsay in The Market: A Microeconomic Model on oligopoly and oligopolistic relationships: “The main difficulty in analyzing an oligopoly is to determine what constraints firms face in a market where there are several competing firms. Firms under oligopoly, as well as under perfect competition and in monopolized markets, face the constraints of the cost curve and demand conditions. But, in addition, they face another limitation: the actions of competing firms. The change in profits that a firm can earn by changing prices, output, or quality characteristics product, depends not only on the reaction of consumers (as in other market structures), but also on how other firms participating in this market will react to it. The dependence of the behavior of each firm on the reaction of competitors is called the oligopolistic relationship. … But the oligopolistic relationship can lead not only to a fierce confrontation, but also to an agreement. The latter occurs when oligopolistic firms see opportunities to jointly increase their income by raising prices and concluding an agreement on the division of the market. If the agreement is open and formal and involves all or most of the producers in the market, it results in the formation of a cartel.”
There are the following definitions of a monopoly:
A type of industry market in which there is a single seller of a product that has no close substitutes. The monopolist exercises control over the price and volume of output, which allows him to receive monopoly profits. Under a monopoly, there are prohibitively high barriers to entry into the industry. A monopoly position in the market can be provided artificially: with the help of exclusive rights, patents and copyrights, ownership of all the most important sources of raw materials, unfair competition;
· the exclusive right of production, trade, trade and other types of activity belonging to one person, group of persons or the state;
· a capitalist association that seized the almost exclusive right to produce and sell a certain category of goods. The purpose of the association is to extract monopoly high profits. The advantage of monopolies over small producers is the ability to ensure a high level of concentration of production and capital, to dictate prices, to keep them on high level etc..
Depending on the scale of market coverage, there is a pure and absolute monopoly. Pure monopoly operates on the scale of one branch of market activity, absolute monopoly captures the entire sphere national economy. If a pure monopoly is formed, as a rule, by a private person, then an absolute monopoly is in the hands of the state.
In a pure monopoly, there is only one seller in the market. It could be state organization(such as the Post Office), a private regulated monopoly (such as Con-Edison in the US), or a private unregulated monopoly (such as DuPont during its nylon introduction period). In every separate case pricing is different. The state monopoly can pursue the achievement of various goals with the help of price policy. It may set a price below cost if the item has importance for buyers who are not able to purchase it at full price. The price can be set with the expectation of covering costs or earning good returns. Or it may be that the price is set very high in order to reduce consumption in every possible way. In the case of a regulated monopoly, the government allows the company to set prices that provide a "fair rate of return" that will enable the organization to maintain production and, if necessary, expand it. Conversely, in the case of an unregulated monopoly, the firm itself is free to set any price that the market can bear. And, nevertheless, for a number of reasons, firms do not always request the maximum possible price- here is the reluctance to attract competitors, and the desire to quickly penetrate - thanks to low prices - to the entire depth of the market.
Let's take a succinct but succinct definition of pure monopoly from Edwin J. Dolan and David E. Lindsay's The Market: A Microeconomic Model: "A monopoly is a situation in which there is only one seller of any good or service in the market."
According to the nature and reasons for the emergence of monopolies are divided into natural, legal and artificial.
Natural monopoly - it is possessed by owners and organizations that own rare and irreproducible resources, as well as infrastructure sectors ( public transport etc.).
Legal monopolies formed legally (patents, etc.)
Natural monopolies cover rare goods, industries and types of production. These associations are formed about those objects, with respect to which it is unacceptable to develop competition. This is usually referred to railways, the country's defense complex, some types of transport and energy. As Stanlake noted, "competition between enterprises in these industries will only lead to duplication of costs for expensive basic equipment." Therefore, it is necessary to create natural monopolies in these industries. It is possessed by owners and organizations that own rare and irreproducible resources, as well as infrastructure sectors (public transport, etc.).
A natural monopoly is characterized by:
positive economies of scale in long term due to technological reasons;
presence of one (two) profitable (large) firms in the industry;
It is possible that there are other firms, which, however, will be unprofitable in the long run;
unregulated profitable pricing of large firms above marginal and average costs;
unprofitable marginal pricing.
Legal monopolies are regulated by law and protected from competition. Members of these monopolies may have patents or copyrights and trademarks. These "attributes" of monopolies help to protect the creator and manufacturer of any product from unscrupulous individuals who are trying to make a fortune using other people's inventions. Violation of these rights by others is punishable by law.
If the main goal of legal monopolies is to protect their rights, then artificial monopolies are created only for the sake of obtaining monetary benefits. The producer creates monopolies by buying up and uniting other associations under his authority in order to assert his dominance in the market for the sake of obtaining monopolistic benefits.
These monopolies deliberately change the structure of the market:
· Create barriers for new firms to enter the market;
· Restrict outsiders (enterprises that are not included in the monopolistic association) access to sources of raw materials and energy;
· Create a very high (compared to new firms) level of technology;
· Apply larger capital;
· "Clog" new firms with well-delivered advertising.
Artificial monopolies form a number of specific forms - cartel, syndicate, trust and concern, etc.
However, the first of their organizational forms were pools, i.e. temporary agreements between two or more firms to share the market and fix prices. They were most popular in the 70s and 80s. XIX century, especially among the railway companies. The pools broke up as soon as one of the participants violated the tacitly established rules, reducing prices or claiming the market share of another participant.
The consortium is based on temporary agreements between industrial companies with the aim of developing and implementing joint large projects. The participants of the consortium are almost completely independent, except for the obligations assumed in the agreement.
A cartel is an association of producers in the same industry that have production and marketing independence. Cartel agreements include uniform, monopolistically high prices, provide for the division of sales markets. Sometimes cartel members have restrictions on the amount of goods produced (quotas) in order to be able to keep high prices.
A syndicate is an association of a number of enterprises of the same industry with the elimination of their trade independence in order to organize a joint sale of products.
A trust is a combination of ownership and management of a number of enterprises in one or more industries with the complete elimination of their independence. The trust not only sells products, but also fully manages the enterprises that are part of it. The Standard Oil Company, founded in 1882 by John D. Rockefeller, is considered the first trust. The name trust comes from the English word trust - to trust. Trusts initially arose in one industry, but gradually began to go beyond its framework (combined trust). This happened either through horizontal combination, i.e. by using by-products of the main production for the production of other goods belonging to another industry; or with the help of vertical combination - the association of enterprises that carry out successive stages of product processing, including those belonging to various industries.
A concern is an association of a number of enterprises of various industries by establishing a single control over them. Group companies are often located in different countries. A special kind of concern is a conglomerate that unites various, unrelated enterprises of various industries. National economy. These are enterprises that retain their independence in matters of production, marketing and supply, which are controlled only by a number of important financial indicators.
By the nature of the pricing policy, one can single out a simple and discriminatory monopoly.
Sometimes, in order to get additional income, a monopoly, using its market position, sells the same product at different prices in different markets. This is in no way connected with the differentiation of prices depending on the quality of goods and services, as well as with differences in costs. Depending on the number of prices charged by the monopolist for the goods offered, R. Barr singles out simple and discriminatory monopolies. In a simple monopoly, the monopolist charges only one price for everyone. In a discriminatory monopoly, the monopolist charges multiple prices. Discrimination occurs when a monopolist offers buyers or groups of buyers the same product at different prices during the same period. There are four types of discrimination:
personal. It is connected with the fact that people have different incomes. Let's take an example. The doctor sets different rates depending on the income level of his patients; or seats in the theater are more expensive in the stalls than in other parts of the hall.
material. It is based on the use of goods and services sold. This may be a different tariff for industrial and domestic use of electricity.
Discrimination based on units of products sold. Its essence lies in the different conditions for the purchase of goods, payment for services by the consumer, depending on the amount of the purchased good. Thus, the prices of goods purchased at retail are always higher than for the same goods at wholesale purchases. The price of a train ticket will increase with the length of the route, but the price of the first kilometers will be more expensive than the subsequent ones.
geographic. The price of the goods and services offered will vary depending on the location of the seller and the buyer.
A situation is possible when there is only one buyer in the market - such a market is called a monopsony. If there is only one seller and only one buyer in the market, this situation is called a bilateral (bilateral) monopoly.
The opposite of pure competition is pure monopoly. A monopoly arises when, for various reasons, there is only one manufacturer in the market for a product - a monopolist capable of satisfying the general 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 dispense with it. The lack of close substitutes for the monopolized product is important from an advertising standpoint. Depending on the type of product or service envisaged, the firm may or may not engage in extensive advertising and promotional activities. For example, a pure monopolist selling luxury goods could advertise extensively in order to increase the demand for their product. Perhaps then more people will want to purchase them, refusing to travel. At the same time, the telephone company, which is the only one in a small town, does not need to advertise its services, since people have ideas about them and know from whom they should purchase them.
If the net monopolists of a number of public utilities are engaged in advertising, then the reason for this is probably an increase in prestige, and not an increase in market share.
On the monopoly market consumer demand, on the one hand, meets the supply of the monopoly firm, on the other. The mechanism of interaction between consumers and a single producer in a monopoly market is fundamentally different from the case of perfect competition.
Individual consumers, unable to influence the market price, are forced to adjust their demand to the price offered by the monopolist. For its part, the monopolist, able to meet the total demand of consumers, chooses the volume and price at which the goods will be completely purchased by consumers in order to maximize their profit.
Entry into the industry under pure monopoly is blocked by existing barriers.
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 producers are extremely large, as in absolute terms as well as in relation to the market. Examples of such industries are the automotive, aluminum industries. If, for example, 3 large firms operate in the entire market and each owns approximately 1/3 of this market, then it is extremely difficult for new competitors to penetrate this market: small firms are not able to obtain such cost savings as the leading "troika" and, hence the amount of profit required for survival and expansion. To enter the industry as a major manufacturer, it is very difficult to find such an amount of money capital that will be necessary in order to purchase equipment comparable to that accumulated by any of the members of the Troika.
Natural monopolies: usually the state provides some kind of privileges to these industries. But in exchange for this exclusive right, it reserves the right to regulate the activities of such monopolies in order to prevent the abuse of the monopoly power it has granted. Examples of natural monopolies are the so-called public utilities - electric and gas companies, bus companies, water supply and communications companies.
The state may also issue patents and licenses, creating legal barriers to entry into the industry. By issuing patents, the state seeks to protect the inventor from illegal seizure of the product or technological process by competing firms that did not share in the time, effort, and money that went into its development. Profits from one important patent can be used to fund the research and development required to develop patentable products. The monopoly power achieved through patents may well increase.
Entry into the industry may be restricted by the state through the issuance of licenses. For example, licenses for radio and television stations, educational institutions.
However, barriers to entry into the industry, which are very significant in the short term, may be surmountable in the long term. Existing patent advantages can be circumvented by the development of a new and different, albeit capable, replacement product. New sources of strategic raw materials may be found
Conclusion
Competition is a necessary and determining condition for the normal functioning of market economy. It has its pros and cons.
The positive features of competition include: the activation of the innovation process, flexible adaptation to demand, high product quality, high labor productivity, minimum costs, etc. this ensures the efficiency of competitive markets.
The negative consequences of competition include: the ruin and impoverishment of a number of producers, excessive differentiation in living conditions, the generation of dishonest practices, crime, excessive exploitation of natural resources, environmental violations, etc.
The experience of recent years indicates increased competition in all areas of market activity. Appearance a large number new enterprises and organizations, import liberalization, formation of the capital market, implementation of Russian market foreign companies - all this greatly complicated the market situation. An increase in the supply of goods and services, on the one hand, and a decrease in effective demand, on the other, have created conditions in which competition has become commonplace.
As practice shows, most Russian enterprises not ready for active competition. Under the conditions of price liberalization and a jump in inflation, the industry found itself in such a difficult situation that any serious innovations related to the strengthening of the competitive position of enterprises became impossible. And yet, a way out of a difficult financial situation can only be on the way to creating a competitive production focused on the needs of consumers. And in this sense, competition is not only a destabilizing factor, but also a condition for the survival of the enterprise.
Summing up the above, it should be noted that competition is a complex multifaceted phenomenon. There are many types and methods of it. This element of the economy should be assessed as a vital and most powerful force for the development of the economy.
Bibliographic list
1) Smith A. Research on the nature and causes of the wealth of nations.
Moscow: Sotsekgiz, 1962. P. 331-332
2) Gasanov R.M. Industrial espionage in the service of monopolies.
M.: International relationships. 1986
Moscow: Williams, 2002, 496 p.
4) Yadgarov Ya.S. History of economic doctrines: Textbook for universities. 3rd
edition. – M.: INFA-M, 1999.
5) Microeconomics: Lecture notes / A.D. Kosmin, V.S. Efremov, N.A. Nikonova, N.A. Potapov. Omsk: Publishing House of OmGTU, 2006. -44 p.
6) Macroeconomics: Lecture notes / A.D. Kosmin, V.S. Efremov, N.A. Nikonova, N.A. Potapov. Omsk: Publishing House of OmGTU, 2006. -36 p.
7) Internet: Wikipedia, the free encyclopedia
http://ru.wikipedia.org/wiki/Competitor
8) Internet: Competition and Monopoly
http://e-theory.narod.ru/articles/part06.html#2
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Class: 10
Equipment: interactive whiteboard (screen), teacher's computer, Microsoft Office PowerPoint 2003, presentation, scales with two bowls, paper weights.
Lesson Objectives:
During the classes
1. Organizational stage
Teacher: "Hello. Today we have to study a rather voluminous material, so I ask everyone to tune in to intensive work.” (In advance, each student is given a worksheet; slide No. 1 on the board).
2. Updating knowledge
Teacher: “The modern market economy is a complex organism, consisting of a huge number of various industrial, commercial, financial and information structures interacting against the backdrop of an extensive system of business legal norms, and united by a single concept - the market. Today in the lesson we will analyze the key concept that expresses the essence of market relations. Your task, after listening to a parable from the famous book "Cash Flow Quadrant" by Robert Kiyosaki, is to determine the topic of the lesson. (further the teacher tells a parable)
3. Learning new material
Teacher: “So, what economic concept is described in this situation ( pupils: “rivalry") and the topic of our lesson: (pupils: “Competition”). There are many statements about this concept, for example: Evin Kannan believes that “economic competition is not war, but rivalry in the interests of each other. 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 what we need to do in the lesson (students: “reveal economic importance competition, determine the advantages and disadvantages of competition”).. To do this, consider the following questions in the lesson: 1) Competition: definitions and functions; 2) Types of competition; 3) Advantages and disadvantages of competition. Let's move on to the first question. We have already met with this concept when studying the 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 - 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 invited to correlate the name of the function with the description of reality, slide 7) their goods. Those. we turn 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 in a table (see appendix), which you will hand over for verification at the end of the lesson.
The teacher on the blackboard shows an example of the type of competition, and the students independently, according to the existing criteria, determine the main features. 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, arguing your answer (see appendix).
After fixing the material on the second question, students are invited to vote “for” or “against” the statement: “Competition is an incentive for business.” Each student puts a paper weight on the scales “For” or “Against” competition, while arguing his answer.
The answers may be as follows:
Advantages:.
1. Promotes more efficient use of resources;
2. Causes the need to respond flexibly and quickly adapt to changing production conditions;
3. Creates conditions for the optimal use of scientific and technological achievements in the field of creating new types of goods, etc.;
4. Provides freedom of choice and action for consumers and producers;
5. Directs manufacturers to meet the diverse needs of consumers and to 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 ecology of the environment;
3. Does not ensure the development of the 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 take a test (see appendix)
Summing up the lesson
Each of you has already received a mark 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:
Homework: paragraph 7.1 (fundamentals of economic theory / edited by S.I. Ivanov); give examples of industrial markets of the Ramensky district for each type of competition.
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) ) Elena Borisova
Group No. 1U1 Course number 1
Topic: Competition, its types and role in the development of the economy
Faculty financial - accounting
Speciality accounting, analysis and audit
scientific adviser Korneenkova Tatyana Pavlovna
___________________ ____________________ ___________________
Date of receipt Admission to protection Work protection
work in the dean's office Signature of the teacher Grade
Teacher's signature
Omsk - 200 9 /20010 academic year
Work plan:
Chapter 1. The essence of competition, the conditions for 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 under 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 his products, the consumer is free to purchase goods, the worker is free to choose a place of work, etc. But freedom of choice does not automatically ensure economic success. He wins in the competition.
Competition is a key category of market relations. It comes in various forms and is carried out in various ways.
As evidenced by general and special encyclopedic dictionaries and reference books, competition (from Latin concurerre - to collide) is a rivalry between market economy participants 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" consist in the need for a constant struggle for existence, for relatively better living conditions, the extreme form of which can be considered a struggle for survival.
Competition occupies a dominant position in the economy of any state, but it 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 the transition of Russia to market methods of management, 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 are consumers in the domestic market both in terms of prices and product quality. After all, competitive products must also have consumer properties that would make them stand out 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 in recent decades. The efficiency of the functioning of the market is higher, the more active the competition and the better conditions for its manifestation. Competition requires an optimal combination of economic, technological and legal prerequisites. Underestimation of this condition hinders the existence of competition or even nullifies it. The result is a 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, maintaining a competitive environment in the Russian Federation, as in all developed countries at the present time, has become an important task of state regulation of the economy.
Thus, the purpose of this work is to consider competition from different angles, to determine its functions in the economy, its main types, as well as the conditions of existence, and its 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, features, advantages and disadvantages, since this form of competition is now the most common. The paper also touches upon the issue of competition in Russia. In Russia, over the years of economic transformations, a special system of economic management, incomprehensible to the whole world, has developed. In accordance with this, the action of competitive patterns is chaotic and has its 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 build 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 was also reflected in the annual message of the President of the Russian Federation D.A. Medvedev. Federal Assembly of the Russian Federation, with which he spoke on March 30 of this year. The President noted: “The main meaning of the country’s development, the main idea of our entry into the 21st century should be to increase competitiveness Russian economy. All actions of the President, the Federal Assembly, the Government, every ministry and department, every politician should be evaluated not in terms of compliance with liberal or anti-liberal views, but by the only criterion - whether these actions contribute to strengthening or weakening the country's competitiveness.
Competition is indeed of great importance in the economic life of society. In this regard, this term should be subjected to careful scrutiny both at the firm level and within the whole country.
This chapter will consider 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.
Competition - translated from Latin means "to collide". In its most general form, competition is the rivalry between market economy participants for the best conditions for the production, purchase or sale of goods. Competition is economic law market economy. It occurs between sellers and buyers, among sellers and among buyers.
The interpretation of the concept of competition in economics has gone through several stages. Competition, as an economic phenomenon, appeared during the establishment of trade relations and acquired its full value with the advent of free market relations. At the same time, the most holistic theoretical provisions about the driving forces of competitive struggle appeared. And the main merit in this is classical political economy, and its main representative A. Smith. He considered competition as something taken for granted, penetrating 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 rivalry 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 - automatically equilibrium mechanism of the market. He proved that competition, by equalizing the rates of profit, leads to the optimal distribution of labor and capital, the regulator of private and public interests.
The "invisible hand" can operate successfully only in conditions of fairly 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 an increase in sales.
Despite the fact that A. Smith did not consider the specific elements of the market mechanism, which 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 rivalry that raises prices (with a reduction in supply) and reduces prices (with an excess of supply);
I determined the main conditions for effective competition, including the presence of a large number of sellers, comprehensive information about them, the mobility of the resources used;
He showed for the first time how competition, by equalizing the rates of profit, leads to the optimal distribution of labor and capital between industries;
Developed the elements of the model of perfect competition and theoretically proved that in its conditions the maximum satisfaction of needs is possible;
He made a significant step towards the formation of the theory of optimal distribution of resources in conditions of perfect competition.
Free competition, the theoretical basis of which was postulated by A. Smith, completely excludes any conscious control over market processes. The coordinating element in his theoretical provisions is the price system in an absolutely decentralized economy.
D.Ricardo, developing the ideas of price regulation of the market with the help of competition, built the most impeccable theoretical model of perfect competition, with the functioning of the market system in the long run. This approach made it possible to get away from the “details” associated with government regulation, monopoly power, geographical features of the market, etc., which are not decisive in the long run.
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 a price balance. The generalizing element of the study was the "law of markets", which postulates the trend of the equilibrium state at full employment.
Significant results that complement the model of perfect competition, but from the position of the law of value, were proposed in "Capital" K. Marx.
In his opinion, competition, 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 profit in all branches of industry and the national economy presupposes complete freedom of competition, freedom of capital flow from one branch to another. And private ownership of land creates a monopoly, an obstacle to this free flow. By virtue of this monopoly, for example, products Agriculture, characterized by a lower composition of capital and a higher rate of profit, do not go into a completely free process of equalizing 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 amount of goods is not enough in comparison with the needs of people.
The neoclassical school, which flourished in the 19th century, presented even more accurately and fully the effect of perfect competition on the price system. The economy of Western society became more and more 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 main provisions 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 "conditionality" of the model of pure competition. The development of the theory of analysis of partial and long-term stable equilibrium in the market, as well as taking into account the development of technology and consumer preferences in determining relative prices, made it possible to create the foundations for the theory of a new model of competition - monopolistic.
Critics of the perfect competition model pointed to the elements of monopoly that permeate the economy and are not reflected in the existing concept. Chronic deficit of the paying balance of many European countries, a sharp slowdown in export growth rates, an 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 failure of laissez-faire approaches to the process of establishing a 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 scholars in modern Western economics are so strong that the very term “competition” is most often used precisely in the 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 single firm alone can significantly affect the price of the product by changing the volume of sales.
The works of J. Robinson "Economic theory of imperfect competition" and E. Chamberlin "The theory of monopolistic competition" summed up the discussions about the nature of pricing in a monopoly and the emergence of non-price forms of competition. Both authors proceed from the fact that the market price is not formed due to the collective actions of market participants, since the heterogeneity of the goods deprives the buyer of the opportunity to have complete information about prices, and manufacturers - to compete with each other due to the lack of a choice of more efficient activities.
Introduced E. Chamberlain the concept of "monopolistic competition" has become an alternative to the concept of "pure competition". He argued that the essence of monopoly is control over supply, and hence price, which is achieved by increasing the substitutability of competing goods, i.e. product differentiation. Wherever there is some degree of differentiation, each seller has an absolute monopoly on his own product, but is also subject to competition from substitutes. Based on this, he believed that it was legitimate to speak of the position of all sellers as "competing monopolists" under the conditions of the forces of "monopolistic competition".
In developing his idea of the process of “product differentiation” as a natural reaction of competitors to a 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 due to special properties (brand name, packaging originality) 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 I saw in imperfect competition 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 government intervention into the economy in order to eliminate the contradictions of imperfect competition identified by it. A detailed justification for such measures a few years later was proposed 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 interventions they recommend are called "Keynesian". Another direction substantiates concepts alternative to Keynesianism, the authors of which are usually called neoliberals.
According to many economists, the "General Theory" J.M. Keynes was a turning point in the economic science of the XX century. and largely determines the economic policy of countries at the present time. Its main idea is that the system of market economic relations is not perfect and self-regulating, and that only active state intervention in the economy can ensure the maximum possible employment and economic growth.
The neoliberal concept is based on the idea of the priority of conditions for unlimited free competition, not in spite of, but due to a certain state intervention in economic processes. Neo-liberals advocate the liberalization of the economy, the use of the principles of free pricing, the leading role in the economy of private property and non-state economic structures.
Such an understanding of competition, as we see, differs significantly from its definition in classical theory, which did not distinguish between competition and rivalry. The classics, speaking of competition, had in mind only perfect competition, within 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 effect 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 a struggle between the old and the new. This struggle is waged by the entrepreneurs, the organizers of production, who blaze new trails and implement new combinations of resources. According to Schumpeter, the task of the entrepreneur is to implement innovations, to fight the routine, not to do what others are doing, to become a “creative destroyer”. Then he can win in the competition, ousting 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 considered competition even more broadly, understanding it as a “discovery procedure”. In his opinion, it is important for an entrepreneur, focusing on the increase or decrease in prices for resources and the benefits produced with their help, to understand in which direction to act, what, how and for whom to produce. In the market, it is only through prices and competition that the hidden becomes clear. 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 has developed the theory of competitive advantage, M. Porter. He defined the competitiveness of a product in terms of "the value of the product to 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 below the consumer value. For the consumer, the unpaid part of the consumer value is equal to the additional profit received by him from the use of the product. For the supplier, it corresponds to the competitiveness of his products.
At the same time, the consumer is interested in making the unpaid share as large as possible. The attitude of the supplier to this value is dual. On the one hand, he also benefits from its large size: a significant margin of competitiveness guarantees that it is his product that will be bought, on the other hand, by raising the selling price and reducing the margin of competitiveness, he increases his profit.
Thus, three approaches to the definition of competition were considered, presented by various theoretical schools. economics. Each approach has its advantages and disadvantages, with the development of economic science, theorists in this field have improved their understanding of competition as the driving mechanism of a market economy.
In the system of a market economy, a firm operating in the market is considered not by itself, but taking into account the totality of relations and information flows that connect it with other market entities. The environment in which the firm operates is commonly referred to as the firm's marketing environment. The marketing environment of a firm is made up of a microenvironment and a macroenvironment. The microenvironment is represented by forces that are directly related to the firm itself and its ability to serve the clientele, that is, suppliers, intermediaries, customers, 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 is ambiguous 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 - rivalry, competition between commodity producers acting on 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 the definition of competition ( see Appendix 1).
Most important in defining competition is the fact that without competition there is no market system. Without competition, the market cannot reveal the creative beginnings of market entities, their initiative and search, does not realize all that thanks to which the market is the driving force of human progress. Competition in a market economy, first of all, is a state, competition, comparison economic conditions and results of business 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 asymmetric. The opposite of their properties is rooted in completely different indicators of the state of the market. A visual representation of this can be presented in a table that characterizes the position of sellers of goods (see table 1).
Table 1
Comparative table of the concepts of "competition" and "monopoly"
|
Market condition parameters |
Competition |
Monopoly |
|
Number of sellers |
||
|
Market Entry and Exit Barriers |
Yes (no entry) |
|
|
Product differentiation |
No (same products of the same kind) |
No (single product) |
|
Participation of firms in price control |
Full control |
There are three main prerequisites, the presence of which is necessary for the functioning of the competition mechanism:
First, the equality of economic agents operating in the market (this largely depends on the number of firms and consumers);
Secondly, the nature of their products (the degree of homogeneity of the product);
Thirdly, the freedom to enter and exit the market (first of all, the absence of barriers to entry in the form of organizational associations and structures).
Competitive tendencies in a developed market are much more stable and stronger than monopolistic ones. In reality, the winners in the competitive struggle are either large, or small, or strong, and sometimes even weak firms. The key to why monopoly does not drive out competition lies in understanding how different competing firms are. It is impossible to reduce competition to the fight of the strong against the weak: in this case, super-powerful monopolies would really drive out all weaker rivals.
In reality, competition is based on a more complex formula. There are several types of economic units, and each of them has its own characteristics: the leading monopolies have strength, small firms have flexibility, specialized companies have adaptability to special segments (“niches”) of the market, innovative firms have pioneering advantages. In specific market situations, one or the other quality gets a decisive advantage.
Competition is objectively coercive for market participants, and primarily for commodity producers. It forces them to systematically apply new technologies, increase labor productivity, reduce or restrain the prices of manufactured products. In other words, competition systematically affects individual production costs in the direction of their reduction, makes it necessary to save resources, to achieve the most rational combination of the factors of production used.
The essence of competition is manifested in the fact that, on the one hand, it creates such conditions for which the buyer in the market has a great many opportunities to purchase goods, and the seller - to sell them. On the other hand, two parties take part in the exchange, each of which puts its own interest above the interest of the partner. As a result, both the seller and the buyer, when concluding an agreement, must make a mutual compromise in determining the price, otherwise the agreement will not take place, and each of them will incur losses.
An indispensable condition for competition is the independence of the subjects of market relations from certain "higher" and external "forces. This independence is manifested, firstly, in the ability to independently make a decision on 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, which guarantees the production of a sufficient amount 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 hand, an increase in efficiency. economic activity, acceleration of NTP. Competition refers to uncontrollable factors that affect the performance of an organization that cannot be controlled by the organization.
Having considered the essence of competition and the conditions for its existence, let us proceed to the definition of competition functions.
The following functions of competition can be distinguished:
Control function. In order to survive in the struggle, the entrepreneur must offer products that the consumer prefers (consumer sovereignty). Hence, the factors of production, under the influence of price, are directed to those industries 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;
Businesses that do not respond to the wishes of customers or violations of the rules of competition by their competitors in the market are penalized in the form of losses or 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 efficient contribution. This is in line with the prevailing competitive principle of performance-based rewards.
Control function . Competition restricts and controls economic strength every enterprise. For example, a monopolist may set a price. At the same time, competition provides the buyer with 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 mandatory rules and risks associated with free competition, for example, by resorting to price fixing or trademark imitation. Therefore, the state must issue regulations which regulate the rules of competition and guarantee:
The quality of the competition;
The very existence of competition;
Prices and product quality should be the focus of competition;
The service offered must be proportionate in price and other contractual terms;
Trademarks and brands 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 examples of industrial aesthetics.
Thus, competition in a market economy plays a significant role in economic development, retains an important place in the market mechanism.
Competition embodies a spontaneously regulating (self-regulating) principle. The forces of competition act in the direction of strengthening the impact of all factors economic efficiency leading to a dynamic balance of supply and demand. Due to its spontaneous nature, competition, especially under the condition of its complete dominance in the market, can cause side negative economic and social consequences. However, in general, it can be said 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 the classification of 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 scheme showing the classification of competition by competition modes and market conditions will be taken as a basis for considering types of competition, since it is the most popular (see Figure 1).
Fig.1 Classification of competition according to the state of the market and according to the methods of competition.
1.3.1. Perfect and imperfect competition
There are many definitions of the term "perfect competition":
Perfect (free) competition is based on private property and economic isolation. It assumes that there are many independent firms in the market, independently deciding what to create and in what quantities.
Perfect competition exists in such areas of activity where there are quite a lot of small sellers and buyers of an identical (identical) 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 the "market of free competition".
The existence of a huge number of buyers and sellers means that none of them has more information about the market than the rest. The seller, having come to the market, finds the 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 on equal terms (price, technology, legal conditions) with existing sellers to start manufacturing products. On the other hand, sellers are free to leave the market, which implies the possibility of an unhindered exit from the market. The freedom of "market" movement creates conditions for the fact that the market always changes the number of producers. 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:
Compliance with all conditions ensures free communication between producers and consumers. Perfect competition is also a condition for the formation of a market mechanism, the formation of prices and self-adjustment of the economic system through the achievement of an equilibrium state, when the selfish motives of individual 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 the above conditions. Therefore, the scheme of perfect competition is mainly of theoretical importance.
Perfect competition assumes that the following conditions are met:
Let's consider each of the conditions in more detail.
1. Product homogeneity. 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 in the view of buyers are indistinguishable, that is, the products of different enterprises are completely interchangeable.
Under these conditions, no buyer will be willing to pay a firm a higher price than he will pay its competitors. After all, the goods are the same, customers do not care which company they buy from, and they, of course, opt for the cheapest. That is, the condition of product homogeneity actually means that the difference in prices is the only reason why the buyer can prefer one seller to another.
2. Small size. Further, under perfect competition, neither sellers nor buyers influence the market situation due to the smallness and multiplicity of all market participants. This means that there are a large number of small sellers and buyers operating in the market, just as any drop of water is made up of a gigantic number of tiny atoms.
At the same time, 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 lower or increase their volumes creates neither surpluses nor deficits. The aggregate 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 loved by the people if one more “spot” appears in addition to the existing ones.
The inability to dictate the price to the market. The above restrictions (homogeneity of products, large number and small size of enterprises) actually predetermine that, under 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 there are such barriers, sellers (or buyers) begin to behave like a single corporation, even if there are many of them and they are all small firms.
All sellers follow well-known unofficial rules (in particular, they keep prices no lower than a certain level). Any outsider who decides to bring down prices, and 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 show themselves and then arrest them), then it fights precisely for the removal of barriers to entering the market.
On the contrary, the absence of barriers typical of perfect competition or the freedom to enter and leave the market (industry) means that resources are completely mobile and move from one activity to another without problems.
In other words, the absence of barriers means the 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 likely profits is freely available to absolutely everyone. Firms have the ability to quickly and rationally respond to changing market conditions by moving the resources used. There are no trade secrets, unpredictable developments, unexpected actions of competitors. That is, decisions are made by the firm 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 an industry that consists solely of numerous perfect competitors.
The advantages of perfect competition include:
Perfect competition is not without a number of disadvantages:
Thus, for all its merits, the market of perfect competition 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 full of large-scale technology and permeated with innovative processes.
Imperfect Competition is defined as follows:
Since the model of perfect competition is a theoretical abstraction, all real markets are imperfect to some extent.
In a perfectly competitive market, there are many sellers and buyers, none of which 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 to produce at a level where marginal cost equals price.
However, in imperfectly competitive markets, individual sellers can influence the price they receive for their products. When considering how they can maximize their 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) product heterogeneity;
4) imperfection (inadequacy) of market information.
Each of these factors individually and all of them together contribute to the deviation of the market equilibrium from the point of equality of supply and demand. So, the only manufacturer of a certain product (monopolist) or a group of large firms conspiring among themselves (cartel) are able to maintain inflated prices without the risk of losing customers because there is simply nowhere else to get this product.
The criterion for imperfect competition is a decrease in the demand curve and prices with an increase in the firm's output. Another formulation is often used: the criterion for imperfect competition is the negative slope of the demand curve for the firm's product.
Thus, if in conditions of perfect competition the volume of output of the firm does not affect the price level, then in conditions of imperfect competition such an effect exists.
The economic meaning of this pattern is that a firm can sell large volumes of products with imperfect competition only by reducing prices.
In fact, under perfect competition, the price remains the same no matter how many products a firm produces, because its size is negligibly small compared to the total market capacity. Whether the mini-bakery doubles, keeps it 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 existence of a relationship between production volumes and the price level directly indicates the importance of the firm in terms of the market. If, say, AvtoVAZ halves the supply of Zhiguli, then there will be a shortage of cars and prices will jump. And so it is with all varieties of imperfect competition.
Under perfect competition, the firm cannot overprice, otherwise people will buy goods not from it, but from competitors. Because of this, there are no incentives to artificially reduce the volume of production. On the contrary, the greater the output, the greater the company's revenue. With imperfect competition, the company is significant in terms of the market. As soon as it reduces the volume of production, the prices of its goods will rise. This creates incentives to underestimate the volume of output.
Imperfect competition is a market situation where at least one condition of perfect competition is not met.
In conditions of imperfect competition, the seller is able to manipulate the price and volume of production in order to maximize profits.
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, the economic rivalry of market entities for market share and profits, obtaining orders and ensuring sales. Distinguish between price and non-price competition.
Price competition involves selling goods or offering services at prices that are lower than those of competitors.
Price competition dates back to those distant days of free market rivalry, when even homogeneous goods were offered on the market at the most varied prices. Price reduction was the basis by which the merchant distinguished his product, drawing attention to it and, ultimately, won the desired market share for himself.
When the markets are monopolized, divided among themselves by a small number of large firms that have seized key positions, manufacturers strive to keep prices constant as long as possible in order to purposefully reduce the cost and marketing costs, to ensure an increase in profits. In monopolized markets, prices lose their elasticity. Once equilibrium has been established, a new attempt to lower the price leads to the fact that competitors react in the same way. The position of firms in the market does not change, but the rate of profit falls, financial condition firms in most cases worsens. That is why today we often see not a decrease in prices as the development of scientific and technical progress, but their increase: 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 cut prices for a very short time for competitive purposes. Large companies may completely abandon 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 reduction in conditions of price competition usually occurs without a decrease in product quality and a change in the range of goods.
Price competition is used mainly by firms - outsiders in the fight against monopolies. In addition, price methods are used to enter 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.
Price competition methods include:
2) competition between buyers of the same industry, which leads to higher prices for the goods offered. The seller raises his price on the basis of calculations showing the losses that the buyer may incur as a result of not satisfying the need;
3) competition between buyers and sellers: buyers prefer to buy goods cheaper, sellers want to sell it more expensive. The outcome of this competitive struggle largely depends on the balance of forces of the competing parties;
4) intersectoral 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.
Distinguish between direct and implicit price competition. In conditions of direct price competition, the company openly announces a decrease in prices for goods and services. For example, in 1982, Data General reduced the price of one of the storage devices by 68%, Perkin-Elmers by 61%, Hewlett Packcord by 37.5% of dollars, resulting in average level prices fell from $20 (early 1981) to $5 (mid 1882). With hidden price competition, the firm improves the properties of its products, but increases the price by a disproportionately small amount of improvements. Thus, in 1976 Crate Reseng released a computer with a capacity 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 conducting successful competition with the help of prices is the constant improvement of production and cost reduction. Wins only the one that has a real chance of reducing production costs.
Non-price competition is usually understood as a set of actions by which entrepreneurial firms seek to increase their competitive advantages without resorting to price variation. Non-price competition is carried out mainly by improving the quality of products and the conditions for their sale. Non-price competition through the sale of products is called competition on terms of sale. 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 the purchase of goods, 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, firms not only convey information to customers about the consumer properties of their products, but also form confidence in their product, pricing, and marketing 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. .
Among the non-price methods include the provision of a large range of services (including staff training), free after-sales service, the offset of the old delivered goods as a down payment for a new one, the supply of equipment on the terms “finished products in hand”.
The reasons for the emergence of non-price competition: a high degree of satisfaction of simple and most urgent needs; income growth; expansion of the market.
It is important that the product offer is unique from the point of view of consumers. This may be due to the high quality of the product. The higher the quality of the product, the more freedom the company has in pricing, the range of competition tools is quite wide.
At present, various kinds of marketing research have received a great development, the purpose of which is to study the needs of the consumer, his attitude to certain goods.
In conditions of non-price competition, the manufacturer usually takes into account such factors as the environmental friendliness of the product, safety for consumption. Trademarks and signs 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 monopoly production.
Depending on the ratio between the number of producers and the number of consumers, the following types of competitive structures are distinguished:
1. Pure competition is a situation where there are 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 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. Such a structure is called oligopoly, and generates 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 goods 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 where numerous, independently operating producers sell identical (standardized) products, and none of them is able to control the market price.
Such identical, or standardized, goods can be, for example, wheat, corn, sugar, 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 to find out the differences in quality, properties - they actually do not exist. And it becomes practically meaningless for the seller to conduct non-price competition. At the same time, each of the sellers is not able to influence the price of the goods that is developing 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. We highlight the main characteristics of pure competition:
a) the large 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 were previously named;
c) free access to the markets for new sellers and the possibility of the same free exit from them. d) availability of complete information from the exchange participants. Buyers should have information about available sellers, their prices, and other terms of sale.
These conditions in most cases today are difficult to implement. Therefore, pure or perfect competition is a rare type of competition in the modern economy. Forms of imperfect competition prevail, where sellers have some control over the market price.
2.2. Oligopoly
Oligopoly- this is a market structure in which not many sellers are involved in the sale of any product, and the emergence of new sellers is difficult or impossible.
Typically, there are two to ten firms in oligopolistic markets that account for half or more of the total sales of a product. In oligopolistic markets, at least some firms can influence the price due to their large shares in the total output. Sellers in oligopolistic markets know that when they or their rivals change prices or quantities of a product, there will be repercussions for 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 activities of an oligopoly include trying to control prices, advertise products, and fix output. The small number of competitors forces them to reckon with each other's reactions to their decisions. In many cases, oligopolies are protected by market entry barriers similar to those set up by monopoly firms.
Oligopolistic markets have the following common features.
1. There are only a few firms 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. Resellers always consider the reactions of their competitors when setting prices, sales targets, advertising costs, 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 products, 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, telephones. Oligopolistic enterprises are usually large-scale structures that conduct large-scale production;
c) the difficulty of entering the industry of new enterprises. Here, potential competitors, potential candidates for entry into the industry face very serious problems. This includes the formation of large start-up financial capital, and technological difficulties, and accessibility to the most important raw materials, and the great opportunities for "veterans" to prevent the emergence of "newcomers" in the industry in various ways, and more. It is really difficult for new firms to break through here;
d) the presence of incentives for mergers, collusion aimed at reducing or eliminating competition. The merging of competitors allows you to get a larger market share, to use economies of scale to a greater extent: both "at the exit" - when selling your products (this can be done at a lower unit cost), and "at the entrance" - when solving problems, resource provision(purchase of large consignments of resources at the lowest prices). Collusions - on prices, places of sale, sales volumes - are possible here because the number of competitors is limited and they are all "in sight", which creates fertile ground for such aspirations.
According to the type of products, a pure oligopoly and a differentiated (by products) oligopoly are usually distinguished. Pure oligopoly - producing a homogeneous product. In this case, the price of goods 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 of the same functional purpose is differentiated. The prices of goods in such a market are usually distributed according to price clusters - groups of prices for the same type, 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 connected with the real circumstance that many sellers, offering similar products, strive at the same time to give them unique, special properties. These differences can be both real and imaginary.
Monopolistic competition is a market situation in which numerous sellers sell similar products in an effort to give them real or perceived unique qualities.
Market monopolistic competition consists of many buyers and sellers who trade 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 options for goods. Sellers compete by offering a differentiated product in a market where new sellers can enter. Real products may differ from each other in quality, properties, external design, but these differences, if any, are very small. Differences may lie in the services associated with the product. Buyers see the difference in offers and are willing to pay for goods in different ways. In order to stand out with something other than price, sellers tend to develop different offers for different market segments and widely use the practice of naming products, advertising, and personal selling methods.
The main characteristics of monopolistic competition include:
a) a relatively large number of small producers;
b) sale of similar but not identical products. Different manufacturers are engaged in the creation of varieties of goods that satisfy, in principle, the same need. But it is impossible to call their products 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 offered goods per one is relatively small. Secondly, the demand for such products is characterized by a rather high degree of elasticity: buyers are sensitive to price changes, and if it rises, they can switch to purchasing similar products from other sellers, ignoring some features in the properties of goods.
d) various agreements between competitors to limit competition, for example, to conduct a coordinated pricing policy, are hardly feasible in practice. The thing is that there are quite a lot of competitors, and, in addition, the very boundaries of the field of competition, the composition of its participants, are blurred and indefinite;
e) there are still opportunities for relatively easy entry of new manufacturers into the industry. The scale of start-up capital, the level of technological complexity do not pose insurmountable barriers to the penetration of new competitors into the industry.
In the market of monopoly competition, each firm produces its own product, and all together - the goods of one product group. The product produced by each firm differs somewhat from the product of the same group produced by other firms. These are, as a rule, goods (or services) of the same purpose - soft drinks, medicines, gasoline of different brands, etc. The products of the group are close substitutes, but differ from each other in workmanship, packaging, design, trademark, after-sales service, etc. And they almost do not differ in price. Each firm is the only producer of its goods and in this sense a monopolist.
The presence of a large number of producers leads to the fact that each firm has a small market share and has very limited control over the market price. In addition, the secret collusion of firms with the aim of limiting the volume of production and artificially raising prices is practically excluded.
Product differentiation under monopolistic competition can take a number of different forms:
It follows from the description of product differentiation that under conditions of monopolistic competition, price competition is accompanied by non-price competition.
It is relatively easy to enter an industry with monopolistic competition. Some difficulty can be created by the need to obtain a product that is different from the competitor's product, and the need for advertising.
2.4. Pure monopoly
Pure, or absolute, monopoly is a market situation in which there is only one seller of a product for which there are no close substitutes. The absence of close substitutes means that the buyer is left with a choice not between goods, but between whether to buy this product or refuse to satisfy the need for it at all. The seller is one, in which case he is the king, and the buyer is the servant. Such a seller has a lot of power. In a pure monopoly, there is no competition at all.
A monopoly arises when, for various reasons, there is only one manufacturer in the market for a product - a monopolist capable of satisfying the general 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 dispense with it. The lack of close substitutes for the monopolized product is important from an advertising standpoint. Depending on the type of product or service envisaged, the firm may or may not engage in extensive advertising and promotional activities. For example, a pure monopolist selling luxury goods could advertise extensively in order to increase the demand for their product. Perhaps then more people will want to purchase them, refusing another product. At the same time, the telephone company, which is the only one in a small town, does not need to advertise its services, since people have ideas about them and know from whom they should purchase them.
If the net monopolists of a number of public utilities are engaged in advertising, then the reason for this is probably an increase in prestige, and not an increase in market share.
We note the main characteristics of a pure monopoly:
a) the sole 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 producers are extremely large, both in absolute terms and relative to the market. Examples of such industries are the automotive, aluminum industries. If, for example, 3 large firms operate in the entire market and each owns approximately 1/3 of this market, then it is extremely difficult for new competitors to penetrate this market: small firms are not able to obtain such cost savings as the leading "troika" and, hence the amount of profit required for survival and expansion.
Natural monopolies: usually the state provides some kind of privileges to these industries. But in exchange for this exclusive right, it reserves the right to regulate the activities of such monopolies in order to prevent the abuse of the monopoly power it has granted. Examples of natural monopolies are the so-called public utilities - electric and gas companies, bus companies, water supply and communications companies.
The state may also issue patents and licenses, creating legal barriers to entry into the industry. Issuing patents the state seeks to protect the inventor from the illegal seizure of a product or process by competing firms that did not participate in the expenditure of time, effort and money that went into its development. Profits from one important patent can be used to fund the research and development required to develop patentable products. The monopoly power achieved through patents may well increase. Entry into the industry may be restricted 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 products that have no substitutes.
It is rare that there is only one seller in the national or world market. Pure monopoly is more common in local markets than in national ones.
The following types of monopolies can be distinguished:
Natural monopoly - 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 it has one, and not several competing firms;
Random 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 release of this 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. Contributing to the growth of the most efficient industries and washing out inefficient economic links, competition acts as a mechanism for regulating national economic proportions. It manifests itself as a way of orienting entrepreneurs to improve the efficiency of management.
Competition is a special way of interaction between market entities. From the point of view of an individual entrepreneur, competition is a process of competitive struggle of 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 the development of the economy.
The economic nature of competition is linked to the splitting of economic power. This means that the very existence of competition, on the one hand, indicates the possibility of securing a certain economic freedom, and on the other hand, and most importantly, on the dispersal of economic power among aspects of the market, allowing them to exercise free choice. Therefore, the role of competition is exhausted only by limited impacts, and at the same time serves as a breeding ground for entrepreneurial structures.
Secondly, by providing equal principles of competitiveness, it counteracts the absolute dominance of any of the advantages of firms, initially causing the existence of their most diverse types and forms. Large enterprises benefit from economic power and scale of production. Small ones, by contrast, compensate for their economic weakness with entrepreneurial flexibility. While specialized firms benefit from their ability to adapt, "innovator firms" take advantage of first movers. The absence of absolute advantages makes their existence inevitable. At the same time, it should be borne in mind that if competition as such, in principle, implies the existence of entrepreneurial structures of different scale and form of organization, then their real diversity in the economy depends on the degree of its rigidity.
Finally, competition is a condition of market activity. By setting the criteria for efficiency and orienting the market towards the search for better business conditions, competition necessitates continuous improvement of the 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 the search for new markets, the creation of new goods and services; the application of new methods of entrepreneurship becomes the 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 efficiency of the functioning of the market is the higher, the more active the competition and the better the conditions for its manifestation. Competition requires a certain, preferably optimal combination of economic, technological and social prerequisites. Violation of this condition hinders the manifestation of competition. The result is a stagnation in the economy, a decrease in its efficiency, 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 increased 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, its weak manifestation is a clear indicator of a clear trouble in the market. For example, a 'scarce market' leads to the elimination or minimization of 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. The total nationalization in 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 product produced.
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 provides commodity-money exchange, organized according to the laws of commodity production.
At its core, the competitive environment functions 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 formation 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 if he does not occupy a dominant position in the market, has monopoly power, the ability to dictate his terms to consumers.
In our country, a special type of monopoly economy has developed, which has no analogues in the world. The reasons for its appearance were:
1) elimination of market conditions of management as a result of 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 environment for economic entities. The state acts both as a monopoly producer and as a monopoly managing principle. Non-state economic actors are built into a monopoly habitat, created by them.
So, the increased role of competition in the modern economic system is as follows:
1) competition ensures an equal position of 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, the seller has the same opportunity to voluntarily decide on the geographical location, time and conditions of the offer of his goods. If, for example, you are not satisfied with the quality of showing films, the repertoire in some cinema, you can “punish” this enterprise by refusing to visit it, become a regular client of another cinema, now giving it your money votes. If many moviegoers do what you do, then the failing theater will be in a rather difficult position. Thus, competition turns out to be an influential instrument of influence of one side of the exchange on the other.
2) competition creates one of the main conditions necessary for the effective performance of coordinating functions at the cost. Free pricing is the main 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 under 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 effectiveness of private enterprise. Competition tests a business for its degree of conformity with the public interest. Not all enterprises can withstand this test; as a result of competition, inefficient structures are continuously culled, i.e., a certain part of economic entities is forced to leave the "field of the economic game."
4) competition creates an interest in improving economic resources, their production combinations, reducing costs per unit of output, scientific and technical renewal of production. For example, the money income of many people is associated with the supply of such economic resource as labor ability. Attracting one or another employee, the price of labor services - wages - in a competitive environment depend on the quality labor abilities. As a rule, a higher competitive position of an employee brings him more money income. This means that a sane person cannot but care about the quality of his resource - labor.
Thus, competition is the basis of a market economy, a powerful stimulus 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, interconnection and struggle between enterprises operating on the market in order to provide better opportunities for marketing products and meet the various needs of customers.
The consequence of competition is, on the one hand, the aggravation of production and market relations, and on the other hand, an increase in scientific and technical 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, and pure monopoly.
Each of which is characterized by a number of features:
Pure competition- many small firms; homogeneity of products; lack of difficulties in entering and exiting (from the industry); equal access to all kinds of information.
Monopolistic competition - many small firms ; product heterogeneity ; lack of difficulties in entering and exiting (from the industry); somewhat limited access to information;
Oligopoly - a small number of large firms; heterogeneity (or uniformity) of products; possible difficulty exiting (from the industry); somewhat limited access to information;
Pure monopoly - the presence of one firm; product uniqueness; 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 anything, it has its pros and cons:
1) it contributes to the development of scientific and technological progress, constantly forcing the commodity producer to apply the best technologies, rationally use resources. In the course of it, economically inefficient production, obsolete equipment, low-quality goods are washed out;
2) it is sensitive to changes in demand, leads to cheaper production costs, slows down the rise in prices, and in some cases to their reduction;
3) to a certain extent equalizes the rate of return on capital and the level 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 underloading of capacities during periods of production downturns.
The main conditions for the emergence of competition are:
1) ownership of the means of production, product and income
2) access to resources and information
3) plurality of isolated producers, economic independence (choosing the type of activity, organizational forms, determining sources of financing, methods and structures for managing production, marketing, etc.)
Market competition is a system of relations between economically independent producers (sellers) of goods and services seeking to find new ways to sell them. economic interests. The conditions for its development, along with the above, are: the interest of subjects in profit growth, stimulation of the creation of new enterprises in monopolized industries, etc.
Bibliography
5. Porter M. Competition M., Williams, 2000
Attachment 1
Table A.1.1
Approaches to the definition of the term "competition"
|
Source |
Characteristic |
Typical definitions of the term "competition" |
|
|
Competition as competitiveness of the market |
Domestic literature |
Based on the everyday understanding of competition as rivalry for achieving the best results in any field |
A) The competitiveness of economic entities, entrepreneurs, when their independent actions effectively limit the ability of each of them to influence the general conditions for the circulation of goods in a given market and stimulate the production of those goods that are required by the consumer; B) competitiveness in the market in the absence of a monopoly; C) competitive, rival relations between two or more economic entities of economic activity, manifested in the desire of each of them to bypass the others in achieving a common goal, to get a better result, to push the rival back; D) rivalry 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, which 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 the rivalry of 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 are dependent on the behavior of individual market participants. |
Annex 2
Table A.2.1
Classification of competition
|
Approach to classification |
Classifications of competition |
|
By the degree of product differentiation |
Homogeneous, homogeneous (no differentiation) Heterogeneous, heterogeneous (with differentiation) |
|
According to the degree of free penetration into the industry |
open Closed semi-closed |
|
By the degree of influence on the choice of a particular market by the firm |
Functional (it arises because any need can be satisfied in various ways. And, accordingly, all goods that provide such satisfaction are functional competitors) Specific (a consequence of the fact that there are goods intended for the same purpose according to some important parameters that differ) Subject (the result of the fact that firms produce, in fact, identical goods, differing only in the quality of workmanship or even the same in quality). |
|
Degree of antagonism |
Competition without extremes In violation of the current legislation |
|
According to the market |
Perfect Competition Imperfect Competition Regulated competition |
|
By way of competition |
Price competition Non-price competition |
Keywords
COMPETITION / PERFECT COMPETITION / PERFECT COMPETITION/ MONOPOLY / MONOPOLY POWER / INTRA-INDUSTRY COMPETITION / INTER-INDUSTRIAL COMPETITION / UNFAIR COMPETITIONThe essence of competition as an objective regularity of the development of commodity production based on private ownership of the means of production and commodity exchange is shown. showing economic basis market economy (private property), which gives rise to the corresponding purpose of production. This goal is to maximize profits and minimize the 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 not seen as an exogenous factor affecting the market economic system from the outside, but as an objective phenomenon inherent in the market system of management as such, which is due to the economic isolation of individual producers. Being an important engine of a market economy, competition does not establish its laws, but only acts as an “executor” of data inherent in commodity production of laws 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 controversial 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 are reduced, and the company is able to reduce retail prices for its products. Therefore, by increasing the efficiency of production, competition acts as a potential factor in lowering prices. On the other hand, under conditions imperfect competition sellers have more freedom in setting prices, as they sell their products in conditions of monopolistic competition or oligopoly. This is the main weakness of the market system of economy.
Theoretical and methodological foundations of the competitiveness of economic entities
2015 / Denisova I.N.The formation of theoretical concepts of competition in the context of the evolution of the main paradigms of economic theory
2010 / Bogdanov D. D.Features of the strategy and tactics of the functioning of agricultural enterprises in the context of growing real economic competition
2016 / Semykin V.A., Solovieva T.N., Safronov V.V., Terekhov V.P.General economy or market economy model: turning profit into average profit. "Dutch disease" as a result of the inequality of industry profit rates. The law of average profit or why the price of oil should go down?
2017 / Sorokin A.V.Imperfection of the competitive mechanism as one of the causes of deformations of distribution relations
2013 / Nikolaeva Elena EvgenievnaDirections for the development of the theory of market competition
2012 / Petrishchev Maxim ViktorovichThe Role of Ownership in Competition
2010 / Bondin Viktor VladimirovichFeatures of modern monopoly as a form of business organization
2014 / Alexey LatyshevA Political Economy View of the Basis of Product Differentiation
2012 / Chernov Mikhail VadimovichCompetitiveness of chemical industry enterprises and approaches to its determination
2018 / Lednitsky Andrey Vikentievich, Silvanovich Irina Alexandrovna, Kupriyan Svetlana VasilievnaThe essence of a competition as an objective law for 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 favorable 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 the 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 the conditions of the market economy. On the one hand, it makes manufacturers constantly to aspire 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 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.
Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.
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Definition of the concept and role of economic competition in the modern market economy. Characteristics of the types of economic competition. Analysis of the schedule of price and volume of production of the firm in conditions of monopolistic competition, maximizing profits.
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term paper, added 11/24/2009
