Perfect and imperfect competition. antimonopoly policy. Perfect, imperfect and pure competition: characteristics and differences Types of competition perfect and imperfect competition
Competition- This is a struggle between participants in economic activity for better conditions for production and marketing. Distinguish between perfect and imperfect competition.
Perfect Competition means that with full mobility (mobility) of resources and goods, there are many sellers and buyers of absolutely identical products who have complete market information and cannot impose their will on each other. The perfect competition market is actually an abstraction, since it is unlikely that at least one of the real markets corresponds to the described essence. If at least one of the conditions is violated, then imperfect competition. In imperfectly competitive markets, the degree of imperfection (ie, the ability to dictate one's own terms) depends on the type of market.
There are four main models (structures) of the market in terms of competition: this is pure competition, pure monopoly, monopolistic competition and oligopoly (the last three refer to imperfect competition).
Pure competition characterized by a large number
firms producing homogeneous (identical) products, the share of each firm in the market is very small, therefore they cannot influence the price, there are no barriers to entry into the market. Examples are the markets for agricultural products dominated by farms, foreign exchange markets, since the conditions on them are close to those of a perfectly competitive market.
Pure monopoly means that there is only one firm in the industry that produces a unique product that has no substitutes; the entrance to the industry is actually blocked, the firm's control over the price is significant, the maximum possible in market conditions. Examples include the gas, water, electricity, transport, public utilities. Barriers to entry of new participants in one or another of these industries are practically insurmountable. Monopoly can be natural or artificial.
A natural monopoly occurs either when the production of a product requires unique natural conditions, or in the case when the existence of several manufacturers in the industry is impractical. An artificial monopoly is created by the collusion of producers.
Along with pure monopoly, there is also pure monopsony. It occurs when there is only one buyer in the market. Monopoly benefits the seller, while monopsony benefits the buyer. There is also a bilateral monopoly, when there is one seller and one buyer in the industry. Such a situation, for example, is possible in the production of military products, when there is one manufacturing company and one customer of this product - the state. At the same time, the situation in the domestic market is considered. However, pure monopoly and pure monopsony are quite rare.
Monopolistic competition characterized by a large number of firms producing differentiated products. Differentiated products are products that satisfy the same need, but differ in quality, brand, packaging, after-sales service, etc. The market share of each firm is small, barriers to entry are easily overcome, and the ability of an individual firm to influence prices is narrowly limited. Examples are the production of clothing, shoes, books, retail, etc.
Oligopoly means that there are few (several) firms on the market that produce the same or differentiated products, the share of each firm in the market is significant, it is difficult to enter the industry. An oligopoly is characterized by a significant influence of an individual firm on the prices of goods and strong interdependence firms in their market behavior. Examples are the metallurgical industry, the automotive industry, and the production of household appliances.
The transition to imperfect competition, monopolistic and oligopolistic structures took place in a market economy at the end of the 19th century. based on the concentration and centralization of production and capital as a result of competition itself. The reasons for the emergence of monopolies include:
Scale effect: as a result, there are natural monopolies- industries in which the existence of a single firm is economically rational, since products can be produced by one firm at lower average costs than if it were produced by several firms;
Scientific and technological progress, i.e. development of new products, technologies, etc.;
Exclusive ownership of some productive resource, for example, establishing control over all oil fields;
Exclusive rights granted to the firm by the state.
Monopolies, seeking to maximize profits, may reduce production and raise prices for goods, which is contrary to the interests of buyers and society as a whole.
The competitive market environment must be guarded against the emergence of a pure monopoly or oligopoly. This can be achieved only with the intervention of the state, through the conduct of antimonopoly policy.
Antitrust policy includes support for small and medium-sized businesses, the dissemination of scientific and technical information, the assumption of reasonable competition from foreign firms, the adoption and implementation of antitrust laws. One of the first antitrust laws appeared in the USA in 1890 (Sherman law). Antitrust law covers two main areas:
Regulates the structure of the industry - market share controlled by one firm, and mergers firms, primarily horizontal(in one industry) and vertical(along the technological chain from the extraction of raw materials to its processing and delivery of finished products to the consumer);
haunts unfair competition, for example, collusion on prices, buying up the assets of one company by another through nominees, etc.
The main purpose of the use of public funds is to achieve an optimal combination of different types of competition and prevent one of them from suppressing others and thereby weakening the overall efficiency. competitive environment. For the formation of normally functioning competitive markets an appropriate legislative framework and public institutions, an effective monetary policy, and measures to protect the interests of national producers in the world market are needed. In modern Russian conditions, the problem of protecting the competitive environment is quite acute, since the monopoly in many industries has been preserved since the days of the USSR. On March 22, 1991, the Law of the RSFSR "On Competition and Restriction of Monopoly Activities in Commodity Markets" was adopted, the first normative act in Russia, aimed at developing competition. This law is constantly being amended and supplemented as the market situation changes. The latest amendments were made on July 26, 2006. The Law and its addenda define the concepts of monopoly high and low prices, the concept of “dominant position” of an economic entity, etc. The law prohibits such entities from abusing their position in the market. Article 10 of the Law is focused on the suppression of unfair competition. Article 17 - to prevent monopoly and oligopolistic mergers. The extreme measure applied to business entities abusing their dominant position is the forced separation of business entities, as defined in Article 19.
The main difficulties in applying antitrust law are to determine the size of the market in which the company accused of monopoly operates and to prove the fact of unfair competition.
Improving production, reducing production costs, automating all processes, optimizing the structure of enterprises - all this is an important condition for development modern business. What is the best way to get businesses to do all this? Market only.
The market is understood as the competition that occurs between enterprises that produce or sell similar products. If there is a high level of healthy competition, then in order to exist in such a market, it is necessary to constantly improve the quality of the product and reduce the level of total costs.
The concept of perfect competition
Perfect competition, examples of which are given in the article, is the complete opposite of monopoly. That is, it is a market in which an unlimited number of sellers operate who deal with the same or similar goods and at the same time cannot influence its price.
At the same time, the state should not influence the market or engage in its full regulation, since this can affect the number of sellers, as well as the volume of products on the market, which is immediately reflected in the price per unit of goods.
Despite the seemingly ideal conditions for doing business, many experts are inclined to believe that in real conditions, perfect competition will not be able to exist in the market for a long time. Examples that confirm their words have happened more than once in history. The end result was that the market became either an oligopoly or some other form of imperfect competition.
can lead to decline
This is due to the fact that prices are constantly decreasing. And if the human resource in the world is large, then the technological one is very limited. And sooner or later, enterprises will move to the fact that all fixed assets and all production processes will be modernized, and the price will still fall due to attempts by competitors to conquer a larger market.
And this will already lead to functioning on the verge of the break-even point or below it. It will be possible to save the situation only by influence from outside the market.
Key Features of Perfect Competition
We can distinguish the following features that a perfectly competitive market should have:
A large number of sellers or manufacturers of products. That is, all the demand that is on the market must be covered by more than one or several enterprises, as in the case of monopoly and oligopoly;
Products in such a market must be either homogeneous or interchangeable. It is understood that sellers or manufacturers produce such a product that can be completely replaced by products of other market participants;
Prices are set only by the market and depend on supply and demand. Neither the state, nor specific sellers or manufacturers should influence pricing. The price of a product should be determined by the level of demand as well as supply;
There should be no barriers to entry or entry into a perfectly competitive market. Examples can be very different from the small business sector, where special requirements are not created and special licenses are not needed: ateliers, shoe repair services, etc.;
There should be no other influences on the market from the outside.
Perfect competition is extremely rare.
In the real world, it is impossible to give examples of perfectly competitive firms, since there is simply no market that operates according to such rules. There are segments that are as close as possible to its conditions.
To find such examples, it is necessary to find those markets in which small business mainly operates. If any firm can enter the market where it operates, and it is also easy to exit it, then this is a sign of such competition.
Examples of Perfect and Imperfect Competition
If we talk about imperfect competition, then monopoly markets are its brightest representative. Enterprises that operate in such conditions have no incentive to develop and improve.
In addition, they produce such goods and provide such services that cannot be replaced by any other product. This explains the poorly controlled, established non-market way. An example of such a market is a whole sector of the economy - the oil and gas industry, and Gazprom is a monopoly company.
An example of a perfectly competitive market is the provision of automotive repair services. There are a lot of various service stations and car repair shops both in the city and in other settlements. The type and amount of work performed is almost the same everywhere.
It is impossible in the legal field to artificially increase the prices of goods if there is perfect competition in the market. Examples confirming this statement, everyone saw in his life repeatedly in the ordinary market. If one seller of vegetables raised the price of tomatoes by 10 rubles, despite the fact that their quality is the same as that of competitors, then buyers will stop buying from him.
If at can influence the price by increasing or decreasing supply, then in this case such methods are not suitable.
Under perfect competition, it is impossible to raise the price on its own, as a monopolist can do.
Due to the large number of competitors, it is simply impossible to raise the price, since all customers will simply switch to purchasing the relevant goods from other enterprises. Thus, an enterprise may lose its market share, which will entail irreversible consequences.
In addition, in such markets there is a decrease in the prices of goods by individual sellers. This happens in an attempt to "win" new market shares to increase revenue levels.
And in order to reduce prices, it is necessary to spend less raw materials and other resources on the production of one unit of output. Such changes are possible only through the introduction of new technologies and other processes that can reduce the cost of doing business.
In Russia, markets that are close to perfect competition are not developing fast enough
If we talk about the domestic market, perfect competition in Russia, examples of which are found in almost all areas of small business, is developing at an average pace, but it could be better. The main problem is the weak support of the state, since so far many laws are focused on supporting large manufacturers, which are often monopolists. In the meantime, the small business sector remains without much attention and the necessary funding.
Perfect competition, examples of which are given above, is an ideal form of competition on the part of understanding the criteria for pricing, supply and demand. To date, no economy in the world can find a market that would meet all the requirements that must be observed under perfect competition.
Department of Economic Theory
Course work
"Competition: essence, perfect and imperfect competition and market models. Monopoly in Russia."
Head: Performer:
Candidate of Economic Sciences, 1st year student of the Faculty of Economics and Physics
Associate Professor EF-13
Prokhorov S.S. Shevlyagina E.A.
St. Petersburg
Introduction ................................................ ................................................. ............................... 2
I. Competition, its essence and significance. Types of Competition............................................... 3
The concept of competition and its role in the economy .... 3
Types of competition .................................................................. ........................................... 4
II. Market models .................................................................. ................................................. ............. five
Perfect competition .................................................................. ............................... 7
Monopolistic competition .................................................................. ................. fourteen
Oligopoly .............................................................. ................................................. ... 19
Monopoly. Monopoly in Russia ............................................................... ................ 24
Conclusion................................................. ................................................. ...................... 32
List of references .............................................................................. ............................... 35
At the end of the 20th century, our country embarked on the path of transition from a planned economy to a market economy, an integral part of which is competition as necessary condition business development.
During the years of the planned economy in our country, competition was not given due attention. It was announced the complete elimination of competition as a relic of the capitalist system and its replacement by conflict-free (with winners and without losers) social competition. Thanks to this, the Russian economy has turned into a system of highly monopolized industries. This has resulted in low production efficiency, excessively high levels of costs, and, in some industries, a deep technological lag behind cutting-edge scientific and technical developments.
Today, we understand that the fiercer the competition in the domestic market, the better prepared national firms are to fight for markets abroad, and the more advantageous are consumers in the domestic market both in terms of prices and product quality. After all, competitive products must have such consumer properties which would distinguish it favorably from similar products of competitors. It is competition that turns the country's economic system into a self-regulating apparatus; it is not for nothing that Adam Smith called it "the invisible hand of the market."
With the transition of Russia to market methods of management, the role of competition in the economic life of society has increased significantly. At the same time, maintaining a competitive environment in the Russian Federation, as in developed countries, has now become an important task of state regulation of the economy. This means that the study of competition and its role in the development of market relations is currently the most important task of economic research in our country.
One of the main problems of the transition period Russian economy unresolved until now, is the formation of competitive markets in the context of a decline in production and a crisis of non-payments that have engulfed all industries and regions of the country.
The problem of natural monopolies remains unresolved. Together, they form the production infrastructure of the state, they are the basis for the revival and further development of domestic industry, the development of the real sector of the economy. Therefore, the task of ensuring their financial stability is of particular importance.
Since the beginning of the 1990s, these problems have become acute for Russia. The success of economic reforms to a large extent depends on a balanced, well-considered system of state regulation of monopoly processes and competitive relations.
The problems of improving competition in the Russian market, increasing the competitiveness of Russian goods, combating monopoly are extremely relevant in modern Russia.
The purpose of this work is to consider the concept of competition, its impact on the behavior of the company and the economy as a whole, to characterize various market models depending on the level of competition in them, to consider the problem of monopolization of the country's economy and to determine the main ways to solve this problem.
The most powerful factor dictating the general conditions for the functioning of a particular market is the degree of development of competitive relations on it. Etymologically word competition goes back to latin concurrentia, meaning clash, contest.
market competition called the struggle for the limited demand of the consumer, conducted between firms in the parts (segments) of the market accessible to them. Competition is the rivalry between participants in the market economy for the best conditions for the production, purchase and sale of goods. Competition - competitive work between producers for the most profitable areas of capital investment, markets, sources of raw materials and at the same time a very effective mechanism for regulating the proportions of social production. It is generated by objective conditions: the economic isolation of each producer, its dependence on market conditions, the confrontation with other commodity owners in the struggle for consumer demand.
Competition performs the most important function in a market economy - it forces producers to take into account the interests of the consumer, and hence the interests of society as a whole. In the course of competition, the market selects from a variety of goods only those that are needed by consumers. They are the ones that sell. Others remain unclaimed, and their production is reduced. In other words, outside a competitive environment, an individual satisfies his own interests, regardless of others. In the conditions of competition, the only way to realize one's own interest is to take into account the interests of other persons. Competition is the specific mechanism by which the market economy addresses fundamental questions what? as? for whom to produce?
The development of competitive relations is closely related to splitting economic power. When it is absent, the consumer is deprived of a choice and is forced either to fully agree to the conditions dictated by the manufacturer, or to be completely left without the good he needs. On the contrary, when economic power is split and the consumer deals with many suppliers of similar goods, he can choose the one that best suits his needs and financial possibilities.
Competition is essential in the life of society. It stimulates the activity of independent units. Through it, commodity producers, as it were, control each other. Their struggle for the consumer leads to a reduction in prices, a reduction in production costs, an improvement in product quality, and an increase in scientific and technological progress. At the same time, competition exacerbates the contradictions of economic interests, greatly enhances economic differentiation in society, causes the growth of unproductive costs, and encourages the creation of monopolies. Without the administrative intervention of state structures, competition can turn into a destructive force for the economy. In order to curb it and keep it at the level of a normal stimulant of the economy, the state in its laws defines the "rules of the game" of rivals. These laws fix the rights and obligations of producers and consumers of products, establish principles and guarantees for the actions of competitors.
Competition is the rivalry of business entities to achieve the highest results in their own interests. Therefore, competition exists wherever there is rivalry between subjects to ensure their interests. As an economic law, competition expresses a causal relationship between the interests of business entities in competition and results in the development of the economy.
In the presence of competition in the market, manufacturers are constantly striving to reduce their production costs in order to increase profits. As a result, productivity is increased, costs are reduced, and the company is able to reduce prices. Competition also encourages manufacturers to improve the quality of goods and constantly increase the variety of goods and services offered. That. manufacturers are forced to constantly fight competitors for buyers in the sales market by expanding and improving the range of high-quality goods and services offered at more low prices. The consumer benefits from this.
Historically, competition arose under conditions of simple commodity production. Each small producer in the process of competition sought to create for himself the most favorable conditions for the production and sale of goods to the detriment of other participants in the market exchange. As the dependence of small commodity producers on the market increases and market fluctuations in prices for the goods they produce, the competitive struggle intensifies. There is a possibility of strengthening the economy, the use of hired workers, the exploitation of their labor, and capitalist competition arises. In modern conditions, competition also acts as an important means of developing production and exists in various forms.
According to the methods of implementation, competition can be divided into price and non-price.
Price Competition involves selling goods at lower prices than competitors. Price reduction is theoretically possible either by reducing production costs or by reducing profits. Small and medium-sized firms, in order to stay in the market, often settle for small profits. Large enterprises can afford to refuse to make a profit at all for a while in order to ruin competitors with the help of cheap products and force them out of the market. This method of ousting competitors from the market (the method of competition) is also known as the "price war". At one time, the American monopoly Coca-Cola used it when invading the markets of countries Latin America, later in the same way, Japanese firms promoted their products in the United States and Western Europe. Recently, interest in price competition has revived again due to the introduction of technologies that save resources and, consequently, reduce costs.
Non-price competition is based on the offer of goods of higher quality, with greater reliability and service life, on the use of advertising methods and other methods of sales promotion.
By industry, intra- and inter-industry competition is distinguished.
Intra-industry competition - competition between entrepreneurs producing homogeneous goods for the best conditions for production and marketing, for obtaining excess profits.
Intersectoral competition is competition between entrepreneurs employed in various industries, due to the profitable investment of capital, the redistribution of profits. Since the rate of profit is influenced by various objective factors, its value in different industries is different. However, every entrepreneur, regardless of where his capital is used, strives to get a profit on it no less than other entrepreneurs. This leads to an overflow of capital from one industry to another: from industries with a low rate of profit to industries with a high one.
Competition is also divided into perfect (free) and imperfect (monopolistic).
For perfect competition is characterized by freedom from any kind of regulation: free access to factors of production, free pricing, etc. With this competition, none of the market participants can have a decisive influence on the conditions for the sale of goods.
monopoly competition differs mainly in that monopolies have the ability to influence the conditions for the sale of goods.
These two types of competition will be discussed in more detail in the following chapters.
¨ Key features of a perfectly competitive market
It should be borne in mind that the features of perfect competition mentioned above are not fully inherent in any of the industries. In its pure form, the conditions of perfect competition do not occur in reality, that is, perfect competition is nothing more than a model of ideal market economy. Such models, reflecting phenomena in a "sterile pure" form, serve as an important tool for economic analysis. Individual industries can only approach the model to varying degrees.
Let us consider in turn the main features of perfect competition.
Under perfect competition, neither sellers nor buyers influence the market situation due to the smallness and multiplicity of all market participants. Sometimes both of these sides of perfect competition are combined, speaking of the atomistic structure of the market. This means that there are a large number of small sellers and buyers operating in the market, just as any drop of water is made up of a gigantic number of tiny atoms.
At the same time, purchases made by the consumer (or sales by the seller) are so small compared to the total volume of the market that the decision to lower or increase their volumes creates neither surpluses nor deficits. The aggregate size of supply and demand simply "does not notice" such small changes. So, if one of the countless beer stalls in Moscow closes, the capital's beer market will not become scarce, just as there will not be a surplus of this drink if, in addition to the existing ones, one more “point” appears.
In order for competition to be perfect, the goods offered by firms must meet the condition of product homogeneity. This means that the products of firms in the view of buyers are homogeneous and indistinguishable, i.e. products of different enterprises are completely interchangeable (they are complete substitute goods). The economic meaning of this provision is as follows: goods are so similar to each other that even a small price increase by one manufacturer leads to a complete switch in demand for the products of other enterprises.
Under these conditions, no buyer would be willing to pay a hypothetical firm more than he would pay its competitors. After all, the goods are the same, customers do not care which company they buy from, and they, of course, opt for the cheapest. That is, the condition of product homogeneity actually means that the difference in prices is the only reason why the buyer can prefer one seller to another. That is why, under conditions of perfect competition, there is no reason for the existence of non-price competition.
Indeed, it is difficult to imagine that one seller of potatoes on the "collective farm" market will be able to impose on buyers a higher price for his product, if other conditions of perfect competition are observed. Namely, if there are many sellers, and their potatoes are exactly the same. Therefore, it is often said that under perfect competition, each individual seller "receives the price" prevailing in the market.
The next condition for perfect competition is the absence of barriers to entry and exit from the market. When there are such barriers, sellers (or buyers) begin to behave like a single corporation, even if there are many of them and they are all small firms. In history, this is exactly how the medieval guilds (shops) of merchants and artisans acted, when, according to the law, only a member of the guild (shop) could produce and sell goods in the city.
Nowadays, similar processes are taking place in criminalized business areas, which, unfortunately, can be observed in many markets of large Russian cities. All sellers follow well-known unofficial rules (in particular, they keep prices no lower than a certain level). Any outsider who decides to bring down prices, and simply trade "without permission", has to deal with bandits. And when, say, the Moscow government sends disguised police officers to the market to sell cheap fruit (the goal is to force the criminal "owners" of the market to show themselves and then arrest them), then it fights precisely for the removal of barriers to entering the market.
On the contrary, typical for perfect competition no barriers or freedom to enter to the market (industry) and leave it means that resources are completely mobile and move from one activity to another without problems. Buyers freely change their preferences when choosing goods, and sellers easily switch production to more profitable products.
There are no difficulties with the termination of operations in the market. Conditions do not force anyone to stay in the industry if it does not suit their interests. In other words, the absence of barriers means the absolute flexibility and adaptability of a perfectly competitive market.
The last condition for the existence of a perfectly competitive market is that information about prices, technology, and likely profits is freely available to everyone. Firms have the ability to quickly and rationally respond to changing market conditions by moving the resources used. There are no trade secrets, unpredictable developments, unexpected actions of competitors. That is, decisions are made by the firm in conditions of complete certainty in relation to the market situation or, what is the same, in the presence of perfect information about the market.
The above conditions actually predetermine that, under perfect competition, market entities are not able to influence prices.
Market entities under conditions of perfect competition can influence the general situation only when they act in agreement. That is, when some external conditions encourage all sellers (or all buyers) of the industry to make the same decisions. In 1998, the Russians experienced this first hand, when in the first days after the devaluation of the ruble, all grocery stores, without agreeing, but equally understanding the situation, unanimously began to raise prices for goods of a “crisis” assortment - sugar, salt, flour, etc. Although the increase in prices was not economically justified (these goods rose in price much more than the ruble depreciated), the sellers managed to impose their will on the market precisely as a result of the unity of their position.
Firms operating in conditions of perfect competition (they are called competitive) perceive the current level in the market equilibrium price as given, which none of the firms can influence. Such firms are called price-takers (from the English price - price, take - take) in contrast to firms - price-makers (make - do), which affect the level of market prices.
An example of a market that is close to the conditions of perfect competition is the global frozen fish market. A single fish-catching firm accounts for 0.0000107% of the world's fish catch. This means that even a 2-fold increase in the volume of fish production by one firm would lead to a decrease in the world price of fish by only 0.00254%, i.e., it would practically not affect its level. Agriculture is also considered one of the industries closest to perfect competition.
A firm under perfect competition
To begin with, we will determine what the demand curve for the products of a firm operating in conditions of perfect competition should look like. First, the firm accepts the market price, i.e. the latter is a given value for it. Secondly, the firm enters the market with a very small part of the total amount of goods produced and sold by the industry. Consequently, the volume of its production will not affect the market situation in any way, and this given price level will not change with an increase or decrease in output.
Obviously, under such conditions, the demand curve for the firm's products will look like a horizontal line (see Fig. 1). Whether the firm produces 10 units, 20 or 1, the market will absorb them at the same price P.
From an economic point of view, the price line, parallel to the x-axis, means the absolute elasticity of demand. In the case of an infinitesimal price reduction, the firm could expand its sales indefinitely. With an infinitesimal increase in the price, the sale of the enterprise would be reduced to zero.
The presence of perfectly elastic demand for the firm's product is called the criterion of perfect competition. As soon as this situation develops in the market, the firm begins to behave like a perfect competitor. Indeed, the fulfillment of the criterion of perfect competition sets many conditions for the company to operate in the market, in particular, determines the patterns of income.
Income (revenue) of the firm is called payments received in its favor when selling products. Like many other indicators, economics calculates income in three varieties. total income(TR) name the total amount of revenue that the company receives. Average income (A R) reflects revenue per unit products sold, or (which is the same) total revenue divided by the number of products sold. Finally, marginal revenue(MR) represents the additional income generated from the sale of the last unit sold.
A direct consequence of the fulfillment of the criterion of perfect competition is that the average income for any volume of output is equal to the same value - the price of the goods and that the marginal income is always at the same level. Let's say, if the market price of a loaf of bread equals 8 rubles, then the bread stall acting as a perfect competitor accepts it regardless of the volume of sales (the criterion of perfect competition is fulfilled). Both 100 and 1000 loaves will be sold at the same price per piece. Under these conditions, each additional loaf sold will bring the stall 8 rubles. (marginal income). And the same amount of revenue will be on average for each loaf sold (average income). Thus, equality is established between average income, marginal income and price (AR=MR=P). Therefore, the demand curve for the products of an individual enterprise in conditions of perfect competition is simultaneously the curve of its average and marginal revenue.
As for the total income (total revenue) of the enterprise, it changes in proportion to the change in output and in the same direction (see Fig. 1). That is, there is a direct, linear relationship: T R=P Q .
If the stall in our example sold 100 loaves of 8 rubles each, then its revenue, of course, will be 800 rubles.
Graphically, the curve of total (gross) income is a ray drawn through the origin with a slope: tg a = DTR/DQ = MR = P.
That is, the slope of the gross income curve is equal to marginal revenue, which in turn is equal to the market price of the product sold by the competitive firm. From this, in particular, it follows that the higher the price, the steeper the straight line of gross income will go up.
The goal of any firm is profit maximization. Profit (p) is the difference between total revenue (TR) and total costs (p) for the sales period:
p = TR - TC = PQ - TC.
It is easy to see that of the three variables on the right side of the equation, the main lever for controlling the volume of profit for the firm is the volume of production. Indeed, the price (P) is a constant under perfect competition, that is, it does not change. This is an external condition of the company's activity, which must be reckoned with, and not a factor that can be controlled. As for the costs (TC), they themselves largely depend on the volume of production. In other words, under conditions of perfect competition, the most important decisions of the firm are primarily related to the establishment of the optimal volume of production. But first it is necessary to find a criterion for the expediency of production.
Like many other indicators, this criterion is not the same for the short and long term.
If we talk about the long-term period, then it is obvious that such the criterion will be the presence of non-negative economic profit(p>0). If economic losses appear in the long run, the owners of the company resort to its liquidation, i.e. to the closure and sale of the property. However, even if the owners of a loss-making company do not want to close it (say, persistently hoping for an improvement in the future), the closing is often carried out against their will. Indeed, in order to continue production, a long-term loss-making firm has to make loans that it cannot repay. Sooner or later, such a policy leads to bankruptcy (or insolvency), that. e. to the inability of the enterprise to pay its obligations. After recognition (in judicial order) a bankrupt company, the former owners are removed from its management, and the property is sent to cover debts to creditors.
The institution of bankruptcy is in a market economy one of the most important mechanisms for ensuring social responsibility entrepreneurs. Having the freedom of entrepreneurship, i.e., the right to make any (legitimate) economic decisions solely at their own discretion, capitalists must pay for possible mistakes with the loss of their property. The threat of bankruptcy and the forced deprivation of property associated with it disciplines the entrepreneur, keeps him from adventurous projects, failure to fulfill obligations to partners, imprudent attraction of borrowed funds without the possibility of returning them.
In Russia, after the default of 1998, a wave of bankruptcies swept the country. Over 4,500 bankruptcy cases were initiated by arbitration courts in 1998, many times more than in all previous years combined. The list of large enterprises that went bankrupt is impressive: in metallurgy, these are the legendary ZapSib, Volzhsky Pipe Plant, KMK, etc.; in the energy sector, Kuzbassenergo, Pechorskaya, Nevinnomysskaya and Stavropolskaya State District Power Plants, Prokopyevskugol, Krasnoyarskugol; Soviet-era audio equipment manufacturer Vega (Berdsk), Novocherkassk Electric Locomotive Plant, Irbit Motorcycle Plant. Even in the “prosperous” oil industry, the bankruptcy procedure for the fifth largest company in the country, Sidanco, began. .
At first glance, it may seem that the profit will determine the decision on the feasibility of production and in short term. However, in reality the situation is more complicated. Indeed, in the short term, part of the company's costs is permanent and does not disappear when production stops. For example, the rent for the land on which the enterprise is located will have to be paid regardless of whether the plant is idle or working. In other words, losses to the firm are guaranteed even in the event of a complete cessation of production.
The firm will have to weigh when the losses will be less. In the event of a complete shutdown of the plant, there will be no income, and the costs will exactly equal the fixed costs. If production continues, variable costs will be added to fixed costs, but income from the sale of products will also appear.
Thus, under unfavorable conditions, the decision to temporarily stop production is made not at the moment when profits disappear, but later, when the losses from production begin to exceed the value of fixed costs. The criterion for the feasibility of production in the short run is that losses do not exceed the size of fixed costs(|p|< TFC).
This theoretical position is fully consistent with economic practice. No one stops production when there are temporary losses. During the financial crisis of 1998. share of unprofitable industrial enterprises in Russia grew, for example, to 51%. But hardly anyone would consider the best way out of a difficult situation to stop half of the country's industry.
Thus, for a firm operating in the short run, there are three possible behaviors:
1. production for profit maximization;
2. production for the sake of minimizing losses;
3. termination of production.
Graphical interpretation of all three options is shown in fig. 2.
The figure shows the standard dynamics of the gross total costs of a certain firm and three variants of curves (more precisely, direct) of gross income that will develop: TR1 - at a high level of prices for the company's products, TR2 - at an average price level and TR3 - at a low one. As already noted, the gross income curve rises the steeper the higher prices.
It is easy to see that the gross income curve only in the first case (TR1) turns out to be on a certain section higher than the gross cost curve (TC). It is in this case that the firm will make a profit, and it will choose the level of production where the profit is maximum. Graphically, this will be the point (Q1) where the TR1 curve is above the TC curve by the maximum distance. The amount of profit (p1) is highlighted in fig. 2 with a thick line.
In the second case (TR2), the income curve is below costs throughout its entire length, i.e. there can be no profit. However, the gap between both curves - and this is how the size of the loss is graphically reflected - is not the same. Initially, the losses are significant. Then, as production grows, they decrease, reaching their minimum (p2) with the release of Q2 units of output. And then they start growing again. It is obvious that the release of Q2, units of production under these conditions is optimal for the firm, since it ensures that it minimizes losses.
Finally, in the third case, the gap between costs and income (curve TR3) only increases with the growth of production. In other words, losses increase monotonically. In this situation, it is better for the firm to stop production, resigned to the inevitable losses in this case in the amount of gross fixed costs (p3).
However, the termination of production does not mean the liquidation of the enterprise (firm). It's just that the company is forced to temporarily stop production. It will stand until the market price increases to such a level that production begins to acquire some meaning. Or the company will be convinced of the long-term nature of the price reduction and will finally cease to exist.
Examples of such situations are temporary shutdowns of Russian enterprises for several months or even years, which, unfortunately, is not uncommon during the years of reforms. Either it stops production of AZLK ("Moskvich"), then ZIL, or even the manufacturer, it would seem hot goods- Moscow region factory "Mars", which produces chocolate bars. There is no need to talk about countless stops of small enterprises against such a background.
Temporary stoppages of production in Russia have a certain specificity compared to those described in the theory. Namely, the low price, as a rule, is not formally their reason. The fact is that, according to our law, the sale of products below cost is simply prohibited, i.e., not only the situation P< АVСmin, но и куда более мягкий случай АТСmin >P > AVCmin can never add up. The factory always charges a price above this level.
But the objective law of economics cannot be canceled with the help of a legal norm. When the real market price falls below the cost, the company's products at the higher price assigned to them cease to be bought. Under these conditions, the company usually takes hidden forms, lowering prices. Namely, he agrees to a delay in payment, accepts less favorable proportions of the exchange of his products for other goods in barter transactions, etc. Most importantly, a lot of unsold products accumulate in the warehouse.
Stopping the enterprise in these conditions allows saving on variable costs (temporarily not paying wages, not purchasing raw materials, etc.). And during this time, wait for the receipt of money from their debtors and sell off the surplus of finished products.
So far, we have talked about competition only as a positive factor, but we should not idealize the market of perfect competition. Indeed, no type of imperfect competition has a set of properties characteristic of perfect competition: the minimum level of costs, the optimal allocation of resources, the absence of deficits and surpluses, the absence of excess profits and losses. In fact, when economists talk about self-regulation of the market, which automatically brings the economy to an optimum state - and such a tradition goes back to Adam Smith, we can talk about perfect competition and only about it.
However, perfect competition is not without a number of disadvantages:
1. Small businesses typical of this type of market are often unable to use the most efficient technique. The fact is that economies of scale are often available only to large firms.
2. The market of perfect competition does not stimulate scientific and technological progress. Indeed, small firms usually do not have enough funds to finance long and expensive research and development projects.
3. A purely competitive economy may not provide a sufficient range of consumer choice or new product development. Pure competition leads to standardization of products, while other market structures (for example, monopolistic competition and often oligopoly) produce a wide range of types, styles, and qualities of any product. Such differentiation of the product expands the range of free choice of consumers and at the same time allows the most complete satisfaction of the preferences of the buyer. Critics of pure competition also point out that since it is not progressive in terms of the development of new production techniques, this market model is not conducive to the improvement of existing products and the creation of new ones.
Thus, for all its merits, the market of perfect competition should not be an object of idealization. The small size of companies operating in a perfectly competitive market makes it difficult for them to operate in a modern world full of large-scale technology and permeated with innovative processes.
¨ Common features of imperfect competition
The vast majority of real markets are markets of imperfect competition. They got their name due to the fact that competition, and hence the spontaneous mechanisms of self-regulation (the "invisible hand" of the market) act on them imperfectly. In particular, the principle of the absence of surpluses and deficits in the economy, which just testifies to the efficiency and perfection of the market system, is often violated. As soon as some goods are redundant, and some are not enough, it is no longer possible to assert that all the available resources of the economy are spent only on the production of the necessary goods in the required quantities.
The prerequisites for imperfect competition are:
1. a significant market share from individual manufacturers;
2. the presence of barriers to entry into the industry;
3. heterogeneity of products;
4. imperfection (inadequacy) of market information.
As we will see later, each of these factors individually and all of them together contribute to the deviation market equilibrium from the point of equality of supply and demand. So, the only manufacturer of a certain product (monopolist) or a group of large firms conspiring among themselves (cartel) are able to maintain inflated prices without the risk of losing customers - they simply have nowhere else to get this product.
As in the case of perfect competition, in imperfect markets one can single out the main criterion that allows one or another market to be classified in this category. The criterion for imperfect competition is a decrease in the demand curve and prices with an increase in the firm's output. Another wording is often used: The criterion for imperfect competition is the negative slope of the demand curve ( D) on the company's products.
Thus, if under conditions of perfect competition the volume of a firm's output does not affect the price level, then under conditions of imperfect competition such an effect exists (this can be clearly seen in Fig. 3).
The economic meaning of this pattern is that a firm can sell large volumes of products with imperfect competition only by reducing prices. Or put another way: the behavior of a firm is significant across the industry.
Indeed, under perfect competition, the price remains the same, no matter how many products a firm produces, because its size is negligibly small compared to the total market capacity. Whether the mini-bakery doubles, keeps it at the same level, or completely stops baking bread, the general situation on the Russian food market will not change in any way and the price of bread will remain its value.
On the contrary, the existence of a relationship between production volumes and the price level directly indicates the importance of the firm in terms of the market. If, say, AvtoVAZ halves the supply of Zhiguli, then there will be a shortage cars and prices will go up. And so it is with all varieties of imperfect competition. Another question is that not only size, but also other factors, in particular, the uniqueness of products, can give importance to a company. But the relationship between the volume of output and the price level is always observed, if it is really a market of imperfect competition.
¨ The main features of the market of monopolistic competition
Monopolistic competition is a form of imperfect competition. Monopolistic competition is a market structure in which a large number of firms produce interchangeable goods and services.
First of all, the term “monopolistic competition” draws attention to itself. He says that within the framework of this market structure, the features inherent in monopoly and perfect competition, which are antipodes, are combined. Monopolistic competition is related to perfect competition by a large number of sellers simultaneously acting on the market for a given product or service. But they offer not the same, but differentiated products, that is, various interchangeable products that satisfy the same need (different types of soap, toothpaste, clothing models, economics textbooks, etc.). Each type of product in relatively small sizes can be produced by small firms. For example, there are many firms in the toothpaste market, but each of them produces a separate type of toothpaste and is a monopolist in its release. Any such firm has a competitor who is trying to take away the consumer from it and offer him a different kind of toothpaste. Therefore, all firms that produce toothpaste are competitors, despite the fact that they sell different types of toothpaste. It is no coincidence that they pursue an active advertising policy.
Using its position as a relative monopolist, the firm can afford to increase the price of its products, which a competitive firm cannot do under the threat of completely losing customers. In the context of offering differentiated products, many of the buyers will still not leave the market, since the seller takes into account their individual needs. For example, women of fashion will not stop making clothes at "their" tailor, even if he raises prices a little; the client of the hairdressing salon will also not leave "his" master in such a case. Unlike an oligopolist, a firm operating under conditions of monopolistic competition does not take into account the response of competitors to its actions, since this is impossible to do in a large number of firms.
There are many firms operating on the market, and among them there are either no large ones at all, or they do not have decisive advantages over small ones and coexist with them. The barriers to entry into such a market are relatively low: opening an upholstered furniture workshop or a fashionable hairdressing salon does not require large capital, and it is difficult for competitors to prevent this. Quitting the market is usually easy - there are always buyers ready to buy a small business.
Why, under such liberal conditions prevailing in markets of the type described, is competition still not perfect? The reason lies in the diversity, differentiation of the product.
The product produced by each company is somewhat different from the products of other companies. Any of the producers occupies a kind of position of a "mini-monopolist" (the only producer of a specific narrow variety of a given product) and has a certain power in the market.
Each firm operating under monopolistic competition controls only a small share of the entire market for the corresponding product. However, product differentiation leads to the fact that the single market breaks up into separate, relatively independent parts (they are called market segments). And in such a market segment, the share of even a small company can become very large.
The enormous difficulties of Russian enterprises in adapting to the conditions of a market economy are a generally recognized fact. In some cases, the source of problems lies in the low differentiation of their products.
The fact is that in the Soviet era, enterprises produced everything according to uniform standards and technologies. Moreover, the assortment was extremely narrow: about a dozen varieties of cars were produced in the country, about the same number of TV sets, sausages, cheese, etc. Because of this, in a market economy, domestic enterprises were doomed to a tough competitive confrontation.
Product differentiation arises from the existence of differences between them in quality, service, advertising. Let's take a closer look at each of these product differentiation factors.
First of all, we emphasize that quality is not a one-dimensional characteristic, i.e. is not limited only to the assessment, a bad product or a good one. Even the basic consumer properties of the simplest products are surprisingly diverse. So, toothpaste should: a) clean the teeth, b) disinfect the oral cavity, c) strengthen the enamel of the teeth, d) strengthen the gums, e) taste good, etc.
And all these properties, only as an exception, can be harmoniously combined in one product. In many cases, a gain in one feature of a product inevitably leads to a loss in another. In this example, the introduction of effective detergents and disinfectants into the composition of the paste irritates the gums; the best medical pastes are rarely palatable. Therefore, already the choice of priorities in the main consumer qualities opens up opportunities for a wide variety of products. And they all become unique in their own way: one paste strengthens the gums better, the other tastes better, etc.
The basis for differentiation can also serve as additional consumer properties, i.e. those features of the product that affect the ease or convenience of its use (for example, different packaging sizes, differences in packaging, etc.).
At the same time, practice shows that in a mature, saturated market, it is additional properties that determine the fate of goods. This, in particular, can be easily traced by observing the zigzags in the development of the market in post-reform Russia. For example, in the conditions of the commodity famine of 1991-1992. butter, if it appeared on sale, was usually in bulk or in random packages, namely in the form in which the given consignment of humanitarian aid arrived. With the saturation of the market by 1997, bright foil packages with oil packages of 200, 250 and 500 g became typical, occasionally there was solid (in plastic boxes) and souvenir packaging (barrels of Vologda oil). Manufacturers sought to improve the chances of selling their products by creating additional convenience for customers: someone needs a small pack, someone is more comfortable with a large one, and someone even wants to take a souvenir from Russia. Excessive demand after the devaluation of 1998 sharply reduced the saturation of the market and returned half-forgotten bulk butter to the shelves.
An important quality characteristic of a product is its location. For retail and many types of services, it is generally crucial. So, if the network of gas stations is rare, then the nearest gas station automatically becomes a monopolist in this area.
Finally, even imaginary qualitative differences between them can serve as the basis for product differentiation. For a long time, in particular, it has been known that a significant percentage of smokers on test trials are unable to distinguish “their” brand from others, although they always buy only it. Thus, from the point of view of the market behavior of the consumer, it does not matter whether the goods are really different. The main thing is that he thinks so.
Differences in service unite the second (after quality) large group of product differentiation factors. The fact is that for a wide group of products, especially for technically complex consumer goods and many goods for industrial purposes, the long-term nature of the relationship between the seller and the buyer is characteristic. An expensive car should work properly not only at the time of purchase, but throughout its entire service life.
The full cycle of service includes pre-sales service (assistance in choosing the right product; for industrial goods, this often involves conducting a whole study); service at the time of purchase (checking, delivery, adjustment) and after-sales service (warranty and post-warranty repairs, making ongoing improvements, advice on optimal operation).
Each of these operations can be performed to a different extent (or not performed at all). As a result, one and the same product, as it were, decomposes into a whole range of varieties that differ sharply in their service characteristics and, therefore, seem to turn into completely different goods. Such a phenomenon can now be observed, in particular, in the Russian computer market, where a limited number of types of computers are offered under different conditions and at very different prices.
The third major group of product differentiation factors is related to advertising.
Secondly, it contributes to the formation of new needs. An example is the promotion of disposable baby diapers to the Russian market. It was advertising that revealed their convenience for parents and benefits for the child, instantly creating a significant market.
Third, advertising creates product differentiation where there is no real difference between them. As already noted, in the cigarette market, many qualitative differences are imaginary. Behind the imaginary differences in quality, very often very real differences in the advertising presentation of the goods are hidden.
Product differentiation provides firms with certain monopolistic advantages. But the situation has another interesting side. We said earlier that access to an industry in which conditions of monopolistic competition have developed is relatively free. Now let's clarify this formulation: entry into such a market is not blocked by any other barriers, with the exception of barriers associated with product differentiation.
In other words, product differentiation not only creates advantages for the company, but also helps protect them from competitors: it is not so easy to accurately replicate the delicate taste of the famous liquor or even find an equivalent response to a successful advertising campaign. Therefore, firms deliberately create and maintain differentiation, thereby achieving additional profits for themselves and along the way (regardless of their will - remember the principle of the "invisible hand") providing a variety of goods on the country's market.
¨ The role of non-price competition
No other market structure price competition doesn't play like this important role as in monopolistic competition.
Of the two main types of competition - price and non-price - our enterprises, on extremely unfavorable terms, were involved in the most severe of them, namely price competition. Firms that conduct price competition try to attract consumers by setting prices lower than those of their rivals. Accordingly, profits are reduced, and if the price falls below costs, then losses appear. Wherein domestic enterprises(especially when trying to enter foreign markets) it is often necessary to compensate for the lag in product quality due to low prices.
On the contrary, with non-price competition, firms seek to attract buyers not by lowering prices, but by increasing the consumer value of the product. This can be achieved in many ways: by improving the quality of a product, by better adapting it to the needs of a particular group of consumers, by creating a fundamentally new type of product, by improving service, by intensifying advertising, etc. At the same time, product differentiation is the basis for non-price competition.
Until the post-war period, of the two types of competition all over the world, the price one noticeably prevailed. At present, however, the situation has changed, and non-price competition has come to the fore. This is due to a number of advantages that this type of competition provides to the firms conducting it.
First, price fights have proved unprofitable for all participants in the struggle, and they are especially destructive for small and medium-sized firms. (Namely, in comparison with Western giants, Russian enterprises are for the most part.) The fact is that the larger the company, the more significant financial resources it has and the longer it can sell goods at reduced prices. Under these conditions, the price war hits the most vulnerable places of the domestic industry weakened by the crisis.
Secondly, in the conditions of a modern highly developed economy, the demands of consumers have become more complicated. The market began to favorably accept numerous and varied variations of goods, it became possible to attract consumers with increased quality, special properties of a product or service, etc. The special properties of a product are often more important than price attractiveness. That is, successful product differentiation is often a way of avoiding any competition in general, leaving for a completely free market niche.
Thirdly, the cost of non-price competition, if done correctly, is cheaper for the firm than the cost of price competition. Indeed, a decrease in prices below the optimal level always leads to a decrease in profits, and the decrease is all the stronger, the greater the reduction in prices. The relationship between measures of non-price competition and profit is much more complicated. A good commercial can cost as much as a bad one. The advantage of the first over the second may well be achieved not due to expensive shooting techniques, but due to interesting idea film, its greater intelligibility, etc. The same goes for product improvements: a small and therefore inexpensive design change, if well conceived, can make a product much more user-friendly. As a result, the growth of competitiveness will be achieved without high costs.
From the above, of course, it does not follow that non-price competition is feasible without any costs at all - good advertising or a high quality product also costs a lot of money. But the field of activity of the company, no doubt, is wider than with price competition. There is always hope to beat the competitor with the best ideas. For example, using the advantages of the Russian engineering school and the huge scientific potential of the country.
Finally, fourthly, price competition in our time in most countries, including Russia, is limited by law. Price reduction should not reach the level of dumping, i.e. the price cannot fall below the cost price.
¨ The main features of the oligopolistic market
Oligopoly is one of the most common market structures in the modern economy. In most countries, almost all branches of heavy industry (metallurgy, chemistry, automotive, electronics, ship and aircraft building, etc.) have just such a structure.
An oligopoly is a market structure in which there are a small number of selling firms in the market for a product, each of which has a significant market share and considerable price control. However, one should not think that companies can literally be counted on the fingers. In an oligopolistic industry, as in monopolistic competition, there are often many small firms along with large ones. However, a few leading companies account for such a large part of the industry's total turnover that it is their activities that determine the course of events.
Formally, oligopolistic industries usually include those industries where several of the largest firms (in different countries from 3 to 8 firms are taken as a reference point) produce more than half of all output. If the concentration of production is lower, then the industry is considered operating in conditions of monopolistic competition.
The main reason for the formation of an oligopoly is economies of scale. An industry acquires an oligopolistic structure if the large size of the firm provides significant cost savings and, therefore, if large firms in it have significant advantages over small ones.
It is customary to say that oligopolistic industries are dominated by the Big Two, Big Three, Big Four, etc. More than half of sales come from 2 to 10 firms. For example, in the United States, four companies account for 92% of the production of all cars. Oligopoly is characteristic of many industries in Russia. Thus, passenger cars are produced by five enterprises (VAZ, AZLK, GAZ, UAZ, Izhmash). Dynamic steel is produced by three enterprises, 82% of tires for agricultural machines - by four, 92% of soda ash - by three, the entire production of magnetic tape is concentrated in two enterprises, motor graders - in three.
In sharp contrast to them are light and food industry. In these industries, the largest 8 firms account for no more than 10%. The state of the market in this area can be confidently characterized as monopolistic competition, especially since product differentiation in both industries is exceptionally large (for example, the variety of varieties of sweets that not even all food industry, and only one of its sub-sectors is the confectionery industry).
But it is not always possible to judge the structure of the market on the basis of indicators relating to the entire national economy. So, often certain firms that own an insignificant share of the national market are oligopolistic in the local market (for example, shops, restaurants, entertainment enterprises). If the consumer lives in big city, it is unlikely that he will go to the other end of the city to buy bread or milk. Two bakeries located in the area of his residence may be oligopolists.
Of course, the establishment of a quantitative boundary between oligopoly and monopolistic competition is largely arbitrary. After all, the two named types of market have other differences from each other.
Products in the oligopolistic market can be either homogeneous, standardized (copper, zinc, steel) or differentiated (cars, household appliances). The degree of differentiation affects the nature of competition. For example, in Germany, car factories usually compete with each other in certain classes of cars (the number of competitors reaches nine). Russian car factories practically do not compete with each other, since most of them are specialized in a narrow field and turn into monopolists.
An important condition affecting the nature of individual markets is the height of the barriers that protect the industry (the amount of initial capital, the control of existing firms over new technology and the latest products with the help of patents and technical secrets, etc.).
The fact is that there can never be many large firms in an industry. Already the multibillion-dollar value of their plants serves as a reliable barrier to the entry of new companies into the industry. In the usual course of events, a firm becomes larger gradually, and by the time an oligopoly is formed in the industry, a narrow circle of largest firms has actually been determined. In order to invade it, one must immediately have such an amount that the oligopolists have gradually invested in the business over decades. Therefore, history knows only a very small number of cases when a giant company was created “from scratch” through one-time huge investments (Volkswagen in Germany can be considered an example, but in this case the state acted as an investor, i.e. non-economic factors).
But even if funds were found for the construction of a large number of giants, they would not be able to work profitably in the future. After all, the market capacity is limited. Consumer demand is enough to absorb the products of thousands of small bakeries or auto repair shops. However, no one needs metal in quantities that could smelt thousands of giant domains.
There are significant limitations in the availability of economic information in this market structure. Each market participant carefully guards trade secrets from its competitors.
A large share in output, in turn, provides oligopolistic firms with a significant degree of control over the market. Already each of the firms individually is large enough to influence the position in the industry. So, if the oligopolist decides to reduce output, this will lead to an increase in prices in the market. In the summer of 1998, AvtoVAZ took advantage of this circumstance: it switched to working in one shift, which led to the dispersal of unsold car stocks and allowed the plant to raise prices. And if several oligopolists begin to pursue a common policy, then their joint market power will come close to that possessed by a monopoly.
A characteristic feature of the oligopolistic structure is that firms, when forming their pricing policy, must take into account the reaction of competitors, that is, all producers operating in the oligopolistic market are interdependent. With a monopolistic structure, such a situation does not arise (there are no competitors), with perfect and monopolistic competition - also (on the contrary, there are too many competitors, and it is impossible to take into account their actions). Meanwhile, the reaction of competing firms can be different, and it is difficult to predict it. Let's say that a firm in the domestic refrigerator market decides to cut the price of its products by 15%. Competitors may react to this in different ways. First, they can cut prices by less than 15%. In this case, this company will increase the sales market. Secondly, competitors can also reduce prices by 15%. The volume of sales will increase for all firms, but due to lower prices, profits may decrease. Thirdly, a competitor may declare a "price war", that is, reduce prices even more. The question then becomes whether to accept his challenge. Usually in a "price war" among themselves large companies do not enter, as its outcome is difficult to predict.
Oligopolistic interdependence - the need to take into account the reaction of competing firms to the actions of a large firm in an oligopolistic market.
Any model of an oligopoly must proceed from taking into account the actions of competitors. This is an additional significant limitation, which must be taken into account when choosing a behavior pattern for an oligopolistic firm. Therefore, there is no standard model for determining the optimal volume of production and the price of products for an oligopoly. It can be said that determining the pricing policy of an oligopolist is not only a science, but also an art. Here, the subjective qualities of a manager play an important role, such as intuition, the ability to make non-standard decisions, take risks, courage, determination, etc.
¨ Varieties of oligopoly
The oligopolistic structure can be very different, each of its varieties leaves its mark on the development of the company's pricing policy. The number and size of firms in the industry, the nature of products, the degree of technology renewal, etc. play a role. Consider some of the options for the market behavior of oligopolistic firms.
Uncoordinated oligopoly, in which firms do not enter into any contacts with each other and do not consciously try to find a point of equilibrium that suits everyone.
Cartel (or collusion) of firms, which does not eliminate their production and marketing independence, but provides for an agreement between them on a number of issues. First of all, cartel agreements include uniform, monopolistically high prices at which cartel members undertake to sell their goods on the market.
The cartel agreement also provides for the division of the sales market. This means that each member of the cartel undertakes to sell their goods, for example, only in certain territories.
In addition, in order to be able to keep high prices, the supply of goods on the market is often limited, and this requires limiting the size of production. Therefore, cartel agreements often provide for the determination of the share in the production of various goods for each member of the cartel.
Collusion can be both secret and legal. In many European countries cartels are allowed, in Russia and the USA they are prohibited by law. There are many international cartels, the most famous of which is OPEC (Organization of the Petroleum Exporting Countries).
Let's assume that the firms - members of the cartel - decided to set a single price for their products. To do this, it is necessary to construct a marginal cost curve for the cartel as a whole. Then it is possible to determine the optimal volume of production in the cartel, which allows maximizing the total profit. In other words, the cartel acts as a monopolist. But the most difficult problem is the distribution of sales between the parties to the cartel agreement. In an effort to maximize profits, the cartel must set quotas in such a way that the total costs are minimal. But in practice, it is rather difficult to implement such an establishment of quotas. The problem is solved by conducting complex negotiations, during which each company seeks to "bargain" for itself the best conditions, to outwit partners. Often, firms with higher costs manage to get large quotas, which does not solve the problem of profit maximization. In fact, markets are usually divided geographically or according to the prevailing volume of sales.
The creation of cartels runs into serious obstacles. It's not just antitrust laws. Agreements are often difficult to reach due to the large number of firms, significant differences in the range of products, the level of costs. Usually, a cartel member is tempted to break the agreement and make a big profit. Due to the legal prohibition, cartels do not officially exist in modern Russia. However, the practice of one-time price collusion is very widespread. It suffices to recall how periodically there is a shortage of either butter or sunflower oil, or gasoline on the consumer market. And how then these goods reappear with greatly increased prices at all sellers at the same time.
Quite often, various associations, such as tea importers, juice producers, etc., try to carry out functions close to cartel on a more permanent basis. In October 1998, for example, the State Antimonopoly Committee of the Russian Federation launched an investigation into the increase in gasoline prices by members of the Moscow Fuel Association, which unites about 60 gas station owners and controls 85-90% of gasoline sold in Moscow.
However, the future is even more fearful in this sense. High concentration production, inability to win customers market methods The close contacts of all enterprises in the main industries that developed in the pre-reform era and a number of other factors favor the mass emergence of cartels. If the development of events really goes according to this scenario, the economy could be seriously damaged. Its prevention is therefore an important task of state economic policy.
Cartel-like market structure(or "playing by the rules"), in which firms deliberately make their behavior understandable and predictable for competitors, which makes it easier for the industry to achieve equilibrium or a state close to it.
Firms do not enter into agreements with each other, but subject their behavior to certain unwritten rules. Such a policy, on the one hand, makes it possible to avoid legal liability arising from anti-cartel legislation. And on the other hand, to reduce the risk of unpredictable reactions of competitors, i.е. protect yourself from the main danger inherent in an uncoordinated oligopoly. "Playing by the rules" facilitates the achievement of oligopolistic equilibrium.
The most commonly used technique of "playing by the rules" is price leadership. It consists in the fact that all large price changes are first carried out by one firm (usually the largest), and then they are repeated in similar sizes by other companies. The price leader actually single-handedly determines prices (and hence the volume of production) for the entire industry. But he does it in such a way that the new prices suit the rest. After all, if they are unprofitable for competitors, then they simply will not follow the leader and the industry will move into a state of uncoordinated oligopoly that is dangerous for all participants. Not coincidentally, therefore, the leader often "probes" the attitude of competitors, publicizing in advance the size of the upcoming change and listening to the reaction of other firms.
Price leadership is very common in the West, and today it can be seen in Russia, for example, in the automotive industry. The Russian automotive industry is a classic example of an oligopoly. In general, there are few independent car manufacturers in the country (about a dozen), and there are even fewer large firms that have a significant impact on the market. So, in the production of passenger cars there are only three of them - AvtoVAZ, GAZ and AZLK.
In 1991-1992 the leader in prices for passenger cars has always been the largest manufacturer - AvtoVAZ. And AZLK and GAZ followed him. It was a time of hyperinflation, when everything went up in price. Crucial had a rate of price increase. And AvtoVAZ set a very fast pace. There were economic opportunities for this. With the beginning of social stratification, almost the first purchase of rich people was just a car. In addition, many cars were bought by new private firms, where mobility is the main key to success.
AvtoVAZ's leadership in prices actually came down to their fastest increase, which was quite suitable for other manufacturers as well. At the turn of 1993, however, AZLK and GAZ refused to repeat the next doubling of prices after the leader. The fact is that the Zhiguli at that time were competitive abroad and AvtoVAZ could focus on higher prices abroad. Having raised prices within the country and, accordingly, having lost part of Russian consumers, he did not lose anything - the released cars were exported and even brought big profits to the plant. On the contrary, the sale of "Moskvich" and "Volga" abroad was small. Their producers had to take into account the purchasing power of Russians to a greater extent. And they stopped raising prices.
VAZ-2109 has become noticeably more expensive than the Volga and almost three times more expensive than the Moskvich. As a result, AvtoVAZ had its first sales problems. The lesson was not in vain: in the same 1993, the growth rate of prices for Zhiguli dropped sharply.
The main factor in subsequent years was the gradual loss of international competitiveness of Russian cars. First, the Zhiguli were forced to leave foreign markets. Then, despite the protective customs duties, foreign cars began to push them in Russia.
A new turn in the situation was caused by the devaluation of the ruble. It made foreign cars prohibitively expensive and paved the way for higher prices for domestic cars. Frightened by recent sales difficulties, AvtoVAZ this time refused to play the role of a leader in their increase. It was taken over by AZLK, which by that time had managed to significantly improve the quality of the cars it produced. Thus, the system of leadership in prices was restored in the industry again.
¨ The main features of a monopoly
Monopoly is the most striking manifestation of imperfect competition. Strictly speaking, in conditions of monopolization of the market, the very existence of competition can be recognized only with great reservations. After all, competition presupposes the division of economic power, the choice of the consumer. That is why the competition between manufacturers for the demand of the consumer begins, there is a desire to satisfy his needs in the best possible way. In conditions of monopoly, consumers are opposed by a single giant producer. Whether the consumer wants it or not, he forced use the monopolist's products, agree to its price terms, etc.
The omnipotence of the monopolist is helped by the uniqueness (indispensability) of the latter's products. Can a resident of Moscow or Vladivostok voluntarily refuse the services of a monopoly supplier of electricity, replacing it with something in the household? Are the coal enterprises of Kuzbass able to transport their products without the help of the railway? The negative answer to such questions is obvious, as well as the fact that such a provision allows the monopolist to dictate its terms from a position of strength.
Strengthens the power of the monopolist over the market and the completeness of the information available to him. Serving all consumers of the industry, he knows exactly the size of the market, he can quickly and with absolute accuracy track changes in sales volumes and, of course, he is aware of the prices in detail, which he himself sets.
It is clear that the combination of all these circumstances creates an exceptionally favorable environment for the monopolist and favorable prerequisites for making super profits. It is obvious, however, that these advantages would instantly disappear if at least one more competitor manufacturer appeared in the industry. The monopolist would immediately have to move from diktat in relation to the consumer to scrupulous consideration of the needs and interests of the latter.
The current generation of Russians, who have experienced the collapse of state monopoly, will easily find a lot of everyday examples of such changes. Stale bread, for example, which until recently reigned supreme in bakeries, instantly became a rarity after the monopoly supply system was replaced by competition from a mass of independent bakeries.
That is why the monopolistic market structure, where it exists, is protected whole system practically irresistible barriers to entry into the industry by independent competitors. The main barriers that exist in the monopolistic industry are:
1. the advantages of large-scale production (up to a natural monopoly);
2. legal barriers (monopoly ownership of sources of raw materials, land, rights to scientific and technological achievements, exclusive rights sanctioned by the state);
3. unfair competition.
Let's take a closer look at these types of barriers.
As in an oligopolistic market, in a monopolized industry only large enterprises . Monopoly chances exist only where size creates large cost advantages. This position of the theory has been repeatedly verified by practical experience.
The fact is that the high profits of monopolists have always been the envy of small companies. In the history of many countries, attempts by small firms under one name or another to create a cartel (association, amalgamation, commission on standards, etc., since cartels are officially prohibited in most countries) and to dictate their terms to suppliers and consumers by joint efforts are recorded.
In modern Russia, for example, such steps were taken by tea importers and juice producers. The outcome of these attempts, however, has always been disappointing for their organizers. Since the costs of this organization were not lower than those of small producers, nothing prevented new, independent firms from entering the industry and successfully competing with the cartel, and dissatisfied members of the association itself (these were bound to appear) to leave it calmly and with impunity.
Another thing is industries where large enterprises have lower costs than competitors. This creates a high barrier to anyone wishing to enter the industry. , and under favorable circumstances for leading firms, it allows them to completely monopolize the market. An example of such a company is the Russian enterprise "Center im. Khrunichev" - manufacturer of heavy space rockets "Proton".
In addition to economic barriers, a monopoly is usually protected by legal barriers (legal) and they often play a decisive role.
The most common source of legal barriers are property rights. If, for example, unique sources of raw materials, lands with special properties, etc., are owned by a certain firm, this automatically creates the preconditions for a monopoly. It is only important that the product produced using these natural resources is itself unique and irreplaceable.
Intellectual property rights also enjoy legal protection. Thus, a properly executed and registered invention (a document confirming this is called a patent) gives its owner a monopoly right to manufacture the corresponding product for a certain period of time. The owner of a patent may solely exercise his monopoly right, or may grant it to other persons (grant a license) in full or in part for a fee. For example, he can sell a license to manufacture and market a patented product in a certain country on the terms of paying a certain percentage of the price of each unit sold.
On the contrary, the absence of a patent deprives the inventor of any privileges. This is how the legal nature of this barrier is manifested: if there is a patent, there is a right; if there is no patent, there are no rights. For our country, this circumstance is of great importance, because almost all inventions of the Soviet era are not protected by international patents and until now are used by foreigners free of charge.
With manifestations unfair competition the state is fighting in the toughest way. The fact is that a large manufacturer in the fight against smaller competitors has a lot of advantages, which actually come down to the use of brute force. Such methods can be used to force the bank to stop lending to competitors, the railroads to stop the transportation of their goods (this is what John D. Rockefeller once did), and so on. There is an opportunity to oust a competitor and establish a monopoly even where it would never have developed in an honest way.
An important type of unfair competition is dumping - the deliberate sale of products below cost in order to oust a competitor. A large firm - a potential monopolist - has large financial reserves. Therefore, it is able to trade for a long time at a loss at low prices, forcing a competitor to do the same. When the latter fails and goes bankrupt, the monopolist will again raise prices and compensate for its losses.
In Russia, the problem of economic monopolization is very acute. The main feature of the monopolization of the Russian market is that it has developed as the "heir" of the state monopoly of the socialist economy.
The socialist economy was a single national economic complex in which each enterprise was not completely autonomous, but was an integral part of the nationwide superstructure. At the same time, the satisfaction of the needs of the whole country in one form or another of the product was often entrusted to only one or two factories. So, at the end of the 80s, more than 1,100 enterprises were complete monopolists in the production of their products. Even more often there was a situation when the number of manufacturers throughout the giant country did not exceed 2-3 plants. In total, out of 327 commodity groups produced by the country's industry, 290 (89%) were subject to strong monopolization.
Thus, if in countries with a market economy, monopolization usually took place through the organizational association of initially independent companies, then socialist monopoly was based on the deliberate creation of only one producer (or a very narrow group of producers).
The beginning of market reforms in our country led to a sharp increase in monopoly tendencies. This was partly due to the collapse of the USSR and the weakening of economic ties between the former Soviet republics. New monopolists were added to the former monopolists, namely, enterprises that were not the only producers within the entire Union, but became such in a reduced territory.
However, the change in business conditions was much more important. Thanks to them, the consequences of monopolization and its impact on the economy have sharply increased. The fact is that the transformation of Russian factories into private enterprises has created a powerful incentive for obtaining monopoly profits. And the freedom to set prices and choose the volumes of production gave firms the means to achieve this goal. All three of the most important consequences of monopolization (underestimation of production, overpricing, obtaining monopoly super-profits), which until then had been restrained by the socialist state, broke out. At the same time, the old vice of Soviet monopoly producers - inefficiency - was preserved wherever the monopoly remained. Strengthening manifestations of monopoly, in turn, had a negative impact on the overall course of reforms in the country.
Using their monopoly power, the monopolists sharply limited supply. The deliberate reduction in output, combined with the increase in prices by Russian monopoly enterprises, was the most important microeconomic reason for the particular depth of the crisis in Russia.
¨ Natural monopolies
In some industries, the rule applies without any restrictions: the larger the scale of production, the lower the costs. This creates the prerequisites for the strengthening of a single manufacturer in such an industry. This state of the market is a monopoly - a situation fraught with a number of major problems for the economy. In this case, however, monopoly arises from natural causes: the technological features of production are such that a single manufacturer serves the market more efficiently than several competing firms are able to do. Economists call such a monopoly natural or technological. Its classic example is various types of infrastructure.
Indeed, it is not economically feasible to build two alternative airports or lay two competing railways next to each other.
It makes no sense to break up natural monopolies. For example, even if the railway network, which is monopoly operated by one company, is divided into several regional sections and transferred to the ownership of independent companies, the natural source of monopoly will still not be eliminated. From city A to city B, it will still be possible to pass only one road. As a result, the single market of transportation services will be divided into a number of local ones. Instead of one monopoly, several will arise (each in its own area). The level of competition will not increase. Moreover, due to the difficulty of harmonizing the work of regional companies, the overall costs of the railway industry may increase.
The macroeconomic aspect of the problem is also important. Infrastructure networks, which are natural monopolies, ensure the interconnection of economic entities and the integrity of the national economic system. They don't speak for nothing. that in modern Russia the economic unity of the country is not least determined by unified railways, common electricity and gas supply.
Thus, the destruction of natural monopolies is unacceptable, but this does not mean that the state should not interfere in their activities, on the contrary, it should regulate the activities of natural monopolies in order to avoid abuses on their part.
¨ Principles of antimonopoly policy
A monopoly is associated with a whole bunch of sharply negative consequences for the country's economy: underproduction, inflated prices, inefficient production. The client of a monopoly company is forced to put up with high prices, to agree with the poor quality of products, their obsolescence (slowdown in technical progress), lack of service and other manifestations of disregard for the interests of the consumer. Even more dangerous is that the monopoly completely blocks the mechanisms of self-regulation of the market.
The omnipotence of the monopolist, due to the insurmountable barriers on the way to the industry, is not threatened by anything even in the long term. The market alone cannot solve this problem. Under these conditions, only a state pursuing a conscious antimonopoly policy can improve the situation. It is no coincidence that in our time there is not a single developed country (and Russia in this sense is no exception) where there would be no special antimonopoly legislation and there would be no special authority to oversee its implementation.
At the same time, the implementation of antimonopoly policy is associated with a number of objective difficulties. As already noted, for industries in which the establishment of a monopolistic structure is possible, a large optimal size of the enterprise is characteristic, i.e. the minimum average long-run costs are achieved at very high volumes of production. Small-scale production in potentially monopolistic industries is extremely inefficient. By assembling cars at tiny enterprises, it is impossible to achieve the same low costs as on the AvtoVAZ assembly line.
And this is far from a special case. You can talk about impossibility, the transformation of a monopolized industry into an industry of perfect competition as a general rule. Transformations of this kind are hindered by positive economies of scale. Even if the state insists on its own and despite the growth of costs will forcibly plant small-scale production, artificially formed dwarf enterprises will turn out to be uncompetitive internationally. Sooner or later they will be crushed by foreign giants.
For these reasons, direct splitting of monopoly firms in developed market economies is quite rare. The usual goal of antitrust policy is not so much to fight monopolists as such, but to limit monopolistic abuses.
The issue is particularly acute with respect to natural monopolies. Their high economic efficiency makes it absolutely unacceptable to crush them. As monopolists, these structures are trying to solve their problems primarily by raising tariffs and prices. The consequences of this for the country's economy are the most devastating. Production costs in other industries are rising, non-payments are growing, and interregional ties are paralyzed.
At the same time, the natural nature of the monopoly position, although it creates opportunities for effective work, by no means guarantees that these opportunities will be realized in practice. Indeed, in theory, RAO UES of Russia could have lower costs than several competing electric power firms. But where is the guarantee that it wants to keep them at a minimum level, and, say, will not increase the costs of the top management of the company.
The main way to combat the negative aspects of natural monopolies is through state control over the pricing of natural monopoly goods and the volume of their production (say, by determining the circle of consumers subject to mandatory service).
In addition to price regulation, reforming the structure of natural monopolies can also bring certain benefits - especially in our country. The fact is that in Russia, within the framework of a single corporation, both the production of natural monopoly goods and the production of goods that are more efficient to produce under competitive conditions are often combined. This association is, as a rule, the nature of vertical integration. As a result, a giant monopoly is formed, representing a whole sphere of the national economy.
RAO "Gazprom", RAO "UES of Russia", the Ministry of Railways are the clearest examples of such associations. RAO Gazprom, along with unified system gas supply of Russia (i.e., a natural monopoly element) includes exploration, production, instrument-making enterprises, design and technological structures, facilities social sphere(i.e. potentially competitive elements). The Ministry of Railways is in charge of both infrastructure (railways, railway stations, information system) and non-monopoly activities (construction and repair organizations, catering enterprises). RAO "UES of Russia" unites both power grids and power plants. Therefore, it is possible to develop competition in those activities of natural monopolies where it can be achieved.
Unlike a natural monopoly, an artificial (or entrepreneurial) monopoly develops in those industries where a single producer does not have increased efficiency compared to several competing firms. The establishment of a monopolistic type of market is therefore not inevitable for such an industry, although in practice it may develop if the future monopolist succeeds in eliminating competitors.
The use of the term "artificial monopoly" in the economic and legal literature has the following feature: this concept is combined both by the dominance of a single monopolist, which is quite rare on the market, and by the more common situation of the predominance of several to some extent cooperating firms on it, i.e. speech at once we are talking about pure monopoly and about two varieties of oligopoly - the cartel and the cartel-like structure of the market. Such an extended interpretation of the term "monopoly" is justified by the fact that in all of the above cases, the firms that dominate the market are to one degree or another able to act as a whole, that is, they show signs of monopolistic domination in the market.
In the case of artificial monopoly, the main direction of antimonopoly policy is to counteract the formation of such monopolies, and sometimes even the destruction of existing ones. To do this, the state uses a wide range of sanctions: these are preventive measures (for example, a ban on the merger of large firms), and various, and often very large, fines for inappropriate behavior in the market (for example, for attempting to collude with competitors), and direct demonopolization, t i.e. the forced fragmentation of the monopolist into several independent firms.
The first legislative act in the history of Russia, regulating the procedure for the competitive behavior of firms in a market economy and containing the "rules" of the game "for competitors, was adopted in March 1991. This is the law of the Russian Federation "On Competition and Restriction of Monopolistic Activities in Commodity Markets". In 1995 d. amendments and additions were made to the text of the Law.
The main body implementing antimonopoly policy in Russia is the Ministry for Antimonopoly Policy and Entrepreneurship Support. Its rights and opportunities are quite wide, and the status corresponds to the position of similar bodies in other countries with a market economy.
In accordance with the new interpretation of the Law, an enterprise that controls 65% or more of the commodity market can be considered an unconditional monopolist. An enterprise that controls 35-65% of the market can also be recognized as a monopolist, but for this, the antimonopoly authorities must prove that there is a "dominant position" of the economic entity in the market by examining the specific market situation.
"Dominant position" gives the firm the ability to exert a decisive influence on competition, hinder market access to other economic entities or otherwise restrict their freedom of economic activity. A list of shares has been established that are treated as abuse of dominant position. These include the withdrawal of goods from circulation in order to create a shortage, the imposition of conditions that are unfavorable to the counterparty or not related to the subject of the contract, the creation of obstacles to competitors' access to the market, and the violation of the established pricing procedure. Collusions on the prices of goods and services, on prices at auctions and tenders, on the division of the market, on the restriction of access to the market are recognized as agreements of economic entities that restrict competition.
The law establishes state control over the creation, merger, accession, transformation, liquidation of business entities, as well as over compliance with antimonopoly laws when acquiring shares, shares, stakes in the authorized capital of an enterprise, forced separation of business entities. The responsibility of the enterprises and officials for violating antitrust laws.
What policy is the state pursuing in relation to natural monopolies? In this case, a contradiction arises. On the one hand, firms - natural monopolists, like any monopolists, set high monopoly prices, reducing the volume of production, and receive excess profits. On the other hand, as mentioned above, competition in industries with a natural monopoly is not economically efficient. Therefore, the state, while maintaining natural monopolies, takes measures to limit their negative consequences for society, primarily by controlling prices for their products.
Considerable attention is paid to the fight against competition-restricting practices of local authorities. In the conditions of an unstable economic situation in the country, regional authorities often try to support their enterprises using illegal methods. For example, under one pretext or another, to prohibit the import of competing goods from other regions. This creates a monopoly position for local producers, which naturally provokes protests from the Ministry of Antimonopoly Policy. However, as in other areas of modern Russian economics and politics, the central authorities, despite the legal validity of their demands, are far from always able to overcome the resistance of local authorities.
In general, the system of antimonopoly regulation in Russia is still in its infancy and requires radical improvement.
Today we can state with satisfaction that the traditionally existing gap between Russia and the developed capitalist countries in the field of theory and practice of competition, at least, has ceased to deepen. A real transition to market relations objectively required a more serious attitude to this.
The positive features of competition are obvious. In the presence of competition in the market, manufacturers are constantly striving to reduce their production costs in order to increase profits. As a result, productivity is increased, costs are reduced, and the company is able to reduce prices. Competition also encourages manufacturers to improve the quality of goods and constantly increase the variety of goods and services offered. That. manufacturers are forced to constantly fight competitors for buyers in the sales market by expanding and improving the range of high-quality goods and services offered at lower prices. The consumer benefits from this.
However, as practice has shown, the majority of Russian enterprises are not ready for active competition. In the conditions of price liberalization and a jump in inflation, the industry found itself in a difficult position.
For many decades of the Soviet period, the economy of our country was closed, there was no competition either between domestic producers (almost all sectors of the national economy were highly monopolized, enterprises did not have the right to make independent economic decisions), or with foreign ones. This led to low production efficiency, an excessively high level of costs, and a deep technological lag behind advanced scientific and technical developments in many sectors of the Soviet economy.
Therefore, the wave of imports that flooded the Russian market after the collapse of the USSR, instead of a positive effect, had an extremely negative impact. Most of the imported goods are produced modern technologies at lower costs than Russian goods, as a result of which they are cheaper and often differ best quality compared to domestic counterparts. In addition, in the conditions of a planned economy, our factories did not have traditions of competitive struggle, such important components of it as non-price competition and advertising were not developed. Thus, Russian manufacturers were simply not ready to compete with foreign ones, and many of them went bankrupt in the first years of the reform, which plunged the country into a deep crisis.
It is possible that such consequences would not have occurred if the state had acted more carefully in relation to the regulation of import volumes, gradually increasing the level of competition in the country's domestic market, enabling domestic producers to adapt to the new conditions.
The problem of the competitiveness of Russian goods remains acute to this day, therefore, a well-thought-out, competent state policy is needed to control the import of goods and promote domestic producers.
And yet, the way out of the heavy financial position can only be on the way to creating a competitive production focused on the needs of consumers. And in this sense, competition is not a destabilizing factor, but a condition for the survival of domestic production.
It is impossible to deny the positive aspects that competition has brought to our economy. The theory of perfect competition is not as far from Russian reality as one might think. This is facilitated by the development of small business in our country, which, despite all the difficulties, is rapidly gaining momentum.
The fact is that the majority of Russian businessmen started their business literally from scratch: no one had large capitals in the USSR. Therefore, small business has embraced even those areas that in other countries are controlled by big capital. Nowhere else in the world do small firms play such a prominent role in export-import transactions. In our country, many categories of consumer goods are imported mainly by millions of shuttles, i.e. not even just small, but the smallest enterprises. In the same way, only in Russia, the smallest firms-teams are actively engaged in construction for private individuals and the repair of apartments. Small-scale wholesale trade is also a specifically Russian phenomenon.
Shuttles, photo studios, hairdressing salons; vendors offering the same brands of cigarettes or chewing gums at metro stations, and car repair shops; typists and translators; apartment renovation specialists and peasants selling vegetable markets - all of them are united by the approximate sameness of the product offered, the insignificant scale of the business compared to the size of the market, the large number of sellers, that is, many of the conditions for perfect competition. Mandatory for them and the need to accept the prevailing market price. The criterion of perfect competition in the sphere of small business in Russia is fulfilled quite often.
Thus, conditions close to perfect competition exist in many sectors of the economy where new private business predominates.
A completely different picture is observed in industries dominated by privatized enterprises. These sectors of the economy are usually highly monopolized.
The high level of monopolization and its sharply negative impact on the economy makes it necessary to conduct an antimonopoly policy in our country. Moreover, Russia needs to be demonopolized; a radical reduction in the number of sectors of the economy where a monopoly has been established.
The main problem and at the same time the difficulty is the specificity of the monopolism inherited from the socialist era: Russian monopolists for the most part cannot be demonopolized by disaggregation.
In the West, the demonopolization of giant enterprises is possible by dividing them into parts. These monopolists were formed by merging and acquiring independent firms. The latter, at least theoretically (in practice, this is rarely done, and there is no need for this, since one hundred percent monopolists are almost never found), can be restored as independent companies. Russian monopolists, on the contrary, were immediately built as a single plant or technological complex, which in principle cannot be divided into separate parts without complete destruction.
Another way of demonopolization - foreign competition - was probably the most effective and effective blow to domestic monopoly. When next to a monopolist's product on the market there is an imported analogue superior in quality and comparable in price, all monopolistic abuses become impossible. The monopolist has to think about how not to be ousted from the market at all.
But the problem is that due to ill-conceived foreign exchange and customs policies, import competition in many cases turned out to be excessively strong. Instead of limiting abuses, it has effectively destroyed entire industries.
Obviously, the use of such a potent method must be very careful. imported goods, no doubt, should be present on the Russian market, being real threat for our monopolists, but should not become the reason for the mass liquidation of domestic enterprises.
Another way - the creation of new enterprises that compete with monopolists - is preferable in all respects. It eliminates the monopoly without destroying the monopolist himself as an enterprise. In addition, new enterprises always mean production growth and new jobs.
The problem is that in today's conditions it is difficult to implement. Because of economic crisis there are few domestic and foreign companies ready to invest in the creation of new enterprises. Nevertheless, certain shifts in this respect, even in crisis conditions, can be governmental support the most promising investment projects.
Natural monopolies present a particular problem. Every now and then in the Russian press there are reports of rolling blackouts, non-payments, conflicts between monopolists and consumers. Perhaps there is no other country where natural monopolies would play such an important role as in Russia, because there is no country comparable to Russia in terms of area and population living in complex climatic conditions. The high efficiency of natural monopolies makes it impossible to break them up. The main way to combat the negative aspects of natural monopolies is through state control over the pricing of natural monopoly goods and the volume of their production.
Since the beginning of the 1990s, these problems have become acute for Russia: without taking firm and consistent measures against monopoly, one cannot hope for the success of economic reform and the transition to a market economy. The success of economic reforms to a large extent depends on a balanced, well-considered system of state regulation of monopoly processes and competitive relations.
On the this stage the problem of monopolization and unfair competition ceases to be purely economic - it becomes more and more political and social. Undoubtedly, in some cases the existence of a monopoly is justified and necessary, but these processes must be strictly controlled by the state to prevent abuse of its monopoly position.
A decisive role in creating a favorable competitive environment in the market is played by antimonopoly legislation and the activities of antimonopoly authorities, the correct behavior of which contributes to the stabilization of the entire economy as a whole.
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Of course, you can get rid of fixed costs if you liquidate the company. But this is already a problem not of the short term, but of the long term, because in the short term, production capacities do not change, including they are not liquidated.
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8.2. Types of competition. Perfect and imperfect competition
Competition comes in different forms and is carried out in different ways. It can be intra-industry (between similar products) and inter-industry (between products of different industries).
It can be price and non-price, perfect and imperfect. Let's look at the last four types of competition in more detail.
Price competition involves the sale of goods and services at prices that are lower than those of a competitor. Price reduction is possible either by reducing costs, or by reducing profits, which only large firms can afford, or by price discrimination.
Price discrimination is the sale of certain types of goods or services produced at the same cost at different prices to different buyers. Differences in price are determined not so much by differences in product quality or production costs, but by the ability of the monopoly to set prices arbitrarily. For example, an airline reduces the cost of air tickets when buying them back and forth; the cinema makes discounts on tickets for children, pensioners or for morning sessions; the institute reduces tuition fees for needy students, etc.
Price discrimination is possible under three conditions:
The seller must be a monopolist or have some degree of monopoly power;
The seller must be able to distinguish buyers into groups that have different ability to pay for the product;
The original buyer should not be able to resell the product or service.
Price competition is often used in the provision of services (doctor, lawyer) or in the transportation of perishable products from one market to another, etc.
Non-price competition is based on the sale of goods of higher quality and reliability, achieved through technical superiority.
Product quality improvement can be achieved:
a) either by differentiating the product itself;
b) either by differentiating the product by marketing methods;
c) either through the competition of new brands.
Differentiation of the product itself means the diversity of homogeneous products by changing their design and improving their quality characteristics. These measures are aimed at winning the "loyalty" of customers, expressed in the conviction of the latter that these products are "better" than competitors' products.
Product differentiation by marketing methods includes: advertising in the media, trial sales, sales promotion through sales agents and the creation of outlets.
The competition of new brands takes into account that in the conditions of technological progress, existing products of firms begin to quickly become obsolete. To remain competitive, a firm must introduce new trade marks or redo old ones.
Depending on how market participants compete with each other, they distinguish between perfect (free) and imperfect competition and the corresponding markets: free competition and imperfect competition.
The smaller the influence of individual firms on the price of products, the more competitive the market is considered.
Perfect Competition(market of free competition) is an ideal image of competition, in which:
Numerous sellers and buyers with equal opportunities and rights operate independently on the market;
The exchange is carried out by standardized and homogeneous products;
Buyers and sellers have complete information about the products they are interested in;
There is the possibility of free entry and exit from the market, and its participants have no incentives to merge.
The main feature of perfect competition is that none of the firms affects the retail price, since the share of each of them in the total output is insignificant.
An increase or decrease in the quantity of output produced by an individual firm does not have a perceptible effect on the total supply and, consequently, on prices. Moreover, no seller will be able to raise the price above the established market price without losing their customers.
Perfect competition is unattainable. You can only get closer to her. With a certain degree of conventionality, competition can be considered free, which existed until about the middle of the 19th century.
Historically and logically, following the analysis of the market of perfect competition, one should turn to the study of the market of imperfect competition. An outstanding contribution to the analysis of the market of imperfect competition was made by such economists as O. Cournot, E. Chamberlin, J. Robinson, J. Hicks and others. Perfect competition turns into imperfect when a monopolist appears on the market.
Therefore, it is useful to precede the consideration of imperfect competition with an analysis of the process of formation of monopolies.
From the second half of the XIX century. under the influence of scientific and technical progress, a rapid process of concentration of production takes place, which leads to the formation of large and super-large enterprises, i.e., monopolies.
A monopoly (Greek monos - one, poleo - sell) occurs when an individual producer occupies a dominant position and controls the market for a given product.
The goal of a monopoly is to obtain the maximum possible income by controlling the price or volume of production in the market. The means to an end is the monopoly price, which provides profits above normal.
Monopolies are formed by the merger of several companies and have the following organizational forms:
Cartel - an agreement on a quota (quantity) of manufactured products and the division of sales markets.
A syndicate is an association for the purpose of organizing joint sales of products.
A trust is a monopoly that combines property, production, and marketing of the products of its member firms.
A concern is a monopoly with a single financial center for all its member firms in different industries, but with a common technology.
A conglomerate is an association based on the penetration of large corporations into industries that have no industrial and technological connection with the area of activity of the parent company.
The emergence of monopolies makes competition imperfect, that is, monopolistic (the market of imperfect competition).
Imperfect competition is understood as a market where at least one of the conditions of free competition is not fulfilled.
First of all, product differentiation that appears on an imperfect market becomes such a condition.
There are three types of imperfect competition: monopolistic competition with product differentiation, oligopoly, and pure monopoly.
1. With monopolistic competition with product differentiation, a large number of sellers and buyers continue to remain on the market. But a new phenomenon arises - product differentiation, i.e., the presence of such properties in the product that distinguish it from similar products of competitors. Such properties are: high quality of the product, beautiful packaging, good sales conditions, favorable location of the store, high level of service, a pretty saleswoman, etc.
Having such advantages, the owner of a differentiated product becomes a monopolist to a certain extent and acquires the ability to influence the price. But since the volume of sales of each seller is relatively small, there are a lot of monopoly firms and each of them has limited control over the market price - this is the hallmark of this type of competition. The term "product differentiation" was introduced into scientific circulation by E. Chamberlin. He associated monopoly power in the market primarily with the nature and characteristics of the goods sold and showed that market relations between the seller and the buyer depend to a large extent on the nature of the product.
2. Oligopolistic competition is represented by a market dominated by several firms (Greek oligos - few, "poleo" - to sell). It is characterized by the presence of either homogeneous or differentiated products, and the main feature is the establishment of prices on the principle of leadership.
This principle assumes that the majority of firms tends to set about the same price as the firm that is the most powerful in this market.
The opposite of oligopoly is oligopsony, when there are several buyers rather than sellers in the market.
3. A pure monopoly exists in the market if:
a) it has only one seller who has no competitors;
b) there are no substitute products, i.e. there are no close substitutes for the monopolist's product;
c) entry is blocked, i.e. entry barriers are so significant that entry of new firms into the market is impossible.
Unlike a perfect market, where entry is free, a pure monopoly does not allow new producers to enter. This means that a pure monopolist-seller can change the price within very wide limits, and the highest possible price is limited only by effective demand. This means that the monopolist will receive excess profits both in the short and in the long run.
However, power over the market price can be exercised not only by the seller, but also by the buyer. This phenomenon is called monopsony (“I buy one”). The problem of imperfect competition was studied by Professor of the University of Cambridge Joan Robinson.
Differences between market structures are presented in table. 8.1.
In reality, there is no only perfect or imperfect competition. As P. Samuelson noted, “the real world ... acts as a kind of combination of elements of competition with imperfections introduced by monopolies” (Samuelson P. Economics. M., 1964. P. 499).
Particular attention should be paid to natural monopolies.
A natural monopoly is such a situation in which economies of scale (for example, a railway network or a country's energy economy) are so significant that the minimum cost is achieved only when the entire output of the industry is concentrated in the hands of one producer. A natural monopoly exists when economies of scale allow one firm to satisfy all market demand before returns to scale start to decline.
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