Competition can take many forms, they may approach perfect competition where there are many buyers and sellers and each has no market power to influence prices or monopoly, where there is only one seller.
Types of competition in the market
The following are the complete types of competition:
- Duopoly: a market structure in which two suppliers of a product compete with each other. A more common condition is that there are more than two suppliers, but only two dominate, for example instant noodle products (Indomie Vs Mie Sedaap).
- Monopoly : a market structure in which there is only one supplier of a non-substitutable product serving many buyers.
- Pure monopoly: a market structure in which there is a single company that is able to completely dictate the price and other attributes of a product or service in the market. Monopsony: a market structure in which there is only one buyer for a product or service.
- Oligopoly: a market structure in which there are only a few product suppliers and they compete with each other. A small number of suppliers leads to mutual interdependence in production and sales. They often anticipate competitive action if there is a change in strategy from others.
- Oligopsony: a market structure in which a large number of suppliers compete with each other for the business of a small number of buyers.
- Monopolistic competition: a market structure in which there are a large number of companies supplying similar but not identical products.
- Pure competition: a market structure in which price is the dominant factor in the preference of a product by customers. The seller’s market share is relatively insignificant. As a result, each seller is relatively powerless to influence the market price of the product.
- Oligopolistic competition: a market structure in which there are only a few suppliers of a product and they compete with each other for a substantial share of the market.
- Perfect competition: a market structure characterized by: there are a large number of suppliers in the market; each supplier has a relatively insignificant market share; all suppliers produce the same product using the same production process; and all suppliers have perfect information about the market.