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Perfect competition is a market in which no competitor has any advantage over the competition. In such an environment, prices are typically at equilibrium and reflect supply and demand perfectly.In most industries, perfect competition doesn't exist as some firms will manage to establish an advantage, even in the most difficult of markets. Examples of markets that are close to perfect include commodities and well regulated stock markets. In the case of stock markets, technology and asymmetrical information can lead to advantages. |
| Area | Economics | | Definition | A market that has no competitor with any advantage over another. | | Examples | Agricultural commodities such as corn are close to perfect. In practice, producers may achieve a cost advantage or be able to differentiate their product. High volume stock markets are close to perfect. How perfect is a matter of debate. For example, information asymmetry may give some investors an advantage. | | Related Concepts | Perfect InformationEquilibriumCompetitive Advantage |
Economics
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