CRITICISM OF THE CONCEPT OF PERFECT COMPETITION

 In reality, there is no market in which perfect competition exists. This is due to the following factors:

  • Very few firms produce homogenous products. Even if the products were fairly identical, consumers are unlikely to view them as such.

CRITICISM OF THE CONCEPT OF PERFECT COMPETITION

  • In real situations, consumers prefer variety for fuller satisfaction of their wants; hence homogenous products may not be very popular in these circumstances.

  • There is a common tendency towards large-scale operation. This tendency works against the assumption of having many small firms in an industry.

  • Firms are not found in one place to cut down on transport costs as this market structure requires.

  • Governments usually interfere in business activities in a variety of ways in the interest of their citizens. The assumption of non-interference by the state is therefore unrealistic in real world situations.

  • The information does not freely flow in real markets so as to make both sellers and buyers fully knowledgeable of happenings in all parts of a given market.

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