The concept of pure competition was developed by prof. Chamberlain. The distinction between pure and perfect Competition is merely a matter degree. The market condition which Utilities four characteristics like large number if buyers and sellers, identical product, freedom of entry, and exit and absence of advertising and selling cost, is called pure competition. According to Prof. Baumol “an industry is said to be operating under conditions of pure competition when there are many firms, homogeneity of products, freedom of entry and exit and independent decision- making.”
As against the pure competition perfect competition is said to exist only when the market situation statistics some other characteristics other than the four characteristic features of pure competition. The perfect compaction companies of certain features like perfect knowledge among buyers and sellers about the market condition, perfect mobility of factors of production between firms, and no transportation cost over above the characteristic features of a pure competition.
Is perfect competition a myth?
Sometimes a debate arises in respect of the reality of perfect competitive market. There is no such market in the real world which satisfies the conditions of perfect competition. It is argued that perfect competition exists only in agrarian sector. Farmers and cultivators
ADVERTISEMENTS:
Unconsciously compete with each other without being aware of the ruling price in the market. Thus their unorganized action makes them unable to influence price in the market. In our country perfect competition is non-existent. The condition of perfect competition is not strictly followed. It is mere theoretical not found in real life
In the competitive markets, buyers and sellers even influence the price by their individual action. Products are not strictly identical. They are a little differentiated through color, packing, methods of promoting sale and advertisement. Buyers and sellers do not have perfect knowledge about the price and commodity in the market.
The determination of price by the combined forces of supply and demand is violated by the unions of sellers and buyers. Demand and supply have no free play. They are regulated by the Govt. Mobility of labour is inhibited by a lot of obstacles like color, language and family affection. Taking all the above reasons, it is concluded that perfect competition is a theoretical concept. It is far from reality. Thus perfectly competitive market is a myth.