Competition - the process by which market operators compete with each other in market transactions, by providing products and services which is more favorable than the current market offering.

Competing can be done on the basis of price, quality, form of payment and others. Depending on the structure of the market different models of competition can be distinguished.

Models of competition

Monopolistic competition

Monopolistic competition model is characterized by a relatively large number of independent companies that sell products with similar characteristics, but which are not perfect substitutes.

Monopolistic competition - consists of three activities:

Perfect competition

It consists of many competitors who offer the same product or service (eg. on commodity exchange). The price is the same for all competitors, as there is no product differentiation here and none of the competitors will advertise its products. Features of the model of perfect competition:

  • A large number of small, independent businesses and a large number of buyers
  • A homogeneous product for all sellers
  • The price is set by market forces, shaped by changes in demand and supply.
  • Free flow of capital between different industries
  • Lack of non-price competition
  • Perfect information

See also: