Imperfect competition exists when there are many sellers, each of whom has a relatively small market share, offering dissimilar goods. Firms have some control—but not necessarily absolute control—over price, through such techniques as differentiating products and limiting supply. There are several types of imperfect competition:
Monopoly has dual definitions:
- (Environments) A market situation where one firm markets all the goods or services and can influence price.
- (Economic) The complete control of an economic good for which there is no substitute.
Monopolistic competition has many sellers, each with a relatively small market share and with differentiated products (i.e., not perfect substitutes for each other), competing for consumer patronage, often by emphasizing marketing variables other than price. The term originated with Harvard economist Edward Chamberlain in the 1930’s.
Monopsony is a condition in which a single buyer controls a market including many sellers of a particular product, driving market prices down.
Oligopoly is a market situation in which there are a small number of sellers (but at least two).
Oligopolistic competition is a market condition in which only a few large sellers vie and collectively account for a relatively large market share. It differs from a monopoly in that there must be at least two sellers. An oligopolistic environment is a market situation in which only a few large firms compete in either buying or selling in the market.
An oligopsony is a market situation in which there are few buyers but potentially a large number of sellers.
Duopoly describes a market situation in which there are only two marketers of an economic good, while demand conditions remain competitive. A duopoly is a specific type of oligopoly.
- American Marketing Association, AMA Dictionary.