Lyneth

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Economics and business

Competition- in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms".

Microeconomic Theory

Perfect competition- (sometimes called pure competition) describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product.

Imperfect competition is a type of market structure showing some but not all features of competitive markets.

Forms of imperfect competition include:

Oligopoly, in which there are few sellers of a product.

Monopolistic competition, in which there are many sellers producing highly differentiated products.

Three levels of economic competition have been classified:

* The most narrow form is direct competition (also called category competition or brand competition), where products which perform the same function compete against each other. For example, one brand of pick-up trucks competes with several other brands of pick-up trucks. Sometimes, two companies are rivals and one adds new products to their line, which leads to the other company distributing the same new things, and in this manner they compete.

* The next form is substitute or indirect competition, where products which are close substitutes for one another compete. For example, butter competes with margarine, mayonnaise and other various sauces and spreads.

* The broadest form of competition is typically called budget competition. Included in this category is anything on which the consumer might want to spend their available money. For example, a family which has $20,000 available may choose to spend it on many different items, which can all be seen as competing with each other for the family's expenditure. This form of competition is also sometimes described as a competition of "share of wallet".