Perfect Competition

Anita Kalatoor

What is Perfect Competition?

Large number of buyers & sellers

No product differentiation

Low barriers to enter and exit

Perfect & equal information

No price restrictions & no collusion

Essentially the opposite of a monopoly

Company Profile

Any agricultural industry would fit into the perfect competition group. For example Perdue Farms. They are a private industry, selling poultry, Grain, pork and turkey. It was founded in 1920 by Arthur and Pearle Perdue. Their annual revenue is over $6 billion. They currently have 19,000 employees

Advantages / Disadvantages of Perfect Competition

  1. They allocate resources in the most efficient way- both productively and allocatively efficient in the long run.
  2. all knowledge is spread out evenly or symmetrically
  3. Only normal profits made just cover their opportunity cost
  4. Maximum consumer surplus and economic welfare
In real life it could be advantageous to ones business to be able to easily enter or exit this type of market. For example starting a small family owned farm and later ending the farm.

The disadvantages:

  1. No Scope for economies of scale because of the high number of firms in the Important industries like clothes and cars
  2. Lack of profits may mean the investment of Research and Development is unlikely. Important for industries like pharmacies
  3. With perfect knowledge there is no incentive to develop new technology

Also there are many pros, the amount of barriers for "Perfect Competition" is too many. Its even in the name! PERFECT competition. Its highly unachievable.

Perfect Competition