Question

Your company is a big retail shop that specialises in groceries operating in South Africa. As one of the players, you do not believe that the industry players are fairly conducting themselves despite the argument from the competition tribunal and parliament that the sector is competitive and is operating freely and fairly. Using relevant examples and your knowledge of market structures, write a critique of the theory of perfect competition and reasons why this market structure might not exist in the real world.

Answer 1

Ans perfect competition is an ideal type which doesn't exist in reality. There us hardly any industry where there are too many sellers so that they are insignificant to influence price. Neither are their similar products. In real world their are too few firms and they produce differentiated goods. E. G colgate and Pepsodent dominate world market of toothpastes. There goods are differentiated Thus they can easily set prices of goods

Perfect competition assumes no barriers to entry. But in real world there are too much barriers to entry like huge advertising by colgate and Pepsodent, customer loyalty to these brands, patents, copyrights etc which act as significant barriers to entry

Perfect competition assumes perfect information but in reality we find ASSYMETRIC information E. G All students don't know exactly about all employment opputunities in the economy.

Because of above reasons we can easily say perfect competition is not found in reality