Author Topic: Pure monopoly, imperfect competition?  (Read 1522 times)

econhelp

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Pure monopoly, imperfect competition?
« on: June 08, 2014, 02:33:41 PM »
I know that monopoly is a form of imperfect competition, but is pure monopoly?
My book firstly says that any market that does not simultaneously have the six conditions of perfect competition is imperfectly competitive, so all markets that are not perfectly competitive are examples of imperfect competition.
Later on in the book it says that imperfect competition ranges from duopoly to markets that approximate to perfect competition, eg. capital market/stock exchange.
I would assume pure duopoly is regarded more extreme than normal monopoly, yet there would still be competition.
The main reason i'm not sure is the face that there is no competition in a pure monopoly so technically it cant be imperfectly competitive?
So I would say that it isn't a form of imperfect competition but i'm not sure, due to the first definition in the textbook.
Should I be considering imperfect substitutes as competition for pure monopoly?

Rhys Williams

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Re: Pure monopoly, imperfect competition?
« Reply #1 on: June 08, 2014, 02:36:34 PM »
Pure monopoly is an example of imperfect competition as the monopoly firm will charge monopoly prices, this situation is therefore imperfect competition. Any market structure where firms are price makers, or isnt under perfect competition, can be described as imperfect competition. The only notable exception is if the market is contestable, in which case the monopoly could be described as competitive depending on the degree of contestability (how many of Baumol's assumptions it meets).

Hope this helps,

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