Microeconomics Perfect Competition Is a

In the modern world access to resources is affected by, for example, credit ratings (access to capital), unequal access to higher education (access to knowledge), legal considerations (unequal access to legal services) and unequal access to many other key inputs. This is in part caused by increases in complexity of both the inputs themselves and of the systems by which we derive access to those inputs.

The sixth characteristic of perfect competition is the lack of externalities in production or consumption. Any externality can upset the competitive balance. Perfect competition represents a situation where buyers and sellers bargain directly; externalities are influencers on this process and therefore by definition interfere with the condition of perfect competition. Changes in communication, education, transportation and political structures have resulted in significant influence of externalities in most market situations in the world today.

Perfect competition is rare in this world. Modern corporations are built on the concept of differentiation. Perfect competition can therefore only exist in a situation devoid of branding and the influence of technology. Moreover, buyers are increasingly ignorant in the face of an overwhelming array of products. Some industries and situations exhibit some of the traits of perfect competition. For example, a row of hot dog carts may sell the same hot dogs with the same toppings at the same price. But one may have developed a brand for itself.

Another may be run by a hot-dog cart cartel and have access to factor ingredients at a lower cost than the other carts. Cart location could be set out by the city, giving individual vendors unequal access to prime corners. Looking around the world, the closest thing to perfect competition is probably found in the agricultural sections of third world markets. All vendors are the same size, all have equal access to the same products, and there are many of them such that no vendor has a dominant market share. All buyers know the products, and there are no externalities. Outside of this limited context, however, we can see that perfect competition is extremely rare in the 21st century.

Works Cited

No author. (2008). “Perfect Competition – the Economics of Competitive Markets” Tutor2U.net Retrieved November 18, 2008 at http://tutor2u.net/economics/content/topics/competition/competition.htm

No author. (2008). “Economics Basics: Monopolies, Oligopolies, and Perfect Competition” Investopedia. Retrieved November 18, 2008 at http://www.investopedia.com/university/economics/economics6.asp

Machovec, Frank M. (1995). “Perfect Competition and the Transformation of Economics” Cato Institute. Retrieved November 18, 2008 at http://www.cato.org/pubs/journal/cj15n2-3-10.html

Townley, Jay. (2006). “A Case Study in Perfect Competition: The U.S. Bicycle Industry” Jay Townley. Retrieved November 18, 2008 at http://www.jaytownley.com/the-bicycle-industry-competition.

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