Imperfect competition

Imperfect competition or imperfectly competitive markets is one in which some of the rules of perfect competition are not followed. Virtually, all real world markets follow this model, as in practice, all markets have some form of imperfection. When dealing with imperfect competition the equilibrium price can be influenced by the actions of agents. In imperfect competition the price of goods can increase above their marginal cost and thus have customers decrease their level of purchase, and so reach inefficient levels of production. Governments try to avoid these situations and take measures to stop imperfect competition.

The most common forms of imperfect competition include: monopolies, oligopolies, duopolies, monopolistic competition and monopsony.

Roy Harrod was the first economist to develop the theory of imperfect competition and, other authors, such as Edward Chamberlin and Joan Robinson renewed its interest and made major contributions. Nevertheless, it is important to point out that Cournot, in his “Researches into the Mathematical Principles of the Theory of Wealth”, 1838, was the first to model this kind of markets.