TYPES OF COMPETITION What are the various competition structures in the marketplace What are the advantages and disadvantages of each structure

PERFECT COMPETITION Used mostly with commodities products are grouped according to quality purchasers can view the product prior to buying all of the products are put up for sale by bidding Advantage Quality is predetermined Disadvantage Requires highly skilled purchaser

IMPERFECT COMPETITION Most common form in marketplace provides similar products at similar prices creates advantages in terms of demands consumers can make on services and goods providers quality reputation, fair pricing needed to obtain market share Advantages Provides a variety of choices for consumer, makes producers respond to consumer demands Disadvantages Creates the need for advertising, which is often misleading and manufactures inflated demand

IMPERFECT COMPETITION Most retail sales are part of the imperfect competition Most services are part of the imperfect competition You can experience imperfect competition in a single retail outlet At a single footlocker location you will find a variety of styles, prices and qualities all under one roof

OLIGOPOLY few firms are dominant in a large market for a given product Examples –automobiles (GM, Ford, Chrysler) –breweries (Molsons, Labats) –financial services (Charter banks, Montreal, CIBC, TD, Nova Scotia) Advantages –Producers capture large portion of market, generally stable companies Disadvantages –Limited choices for consumers, swallowing up of new competitors by major players

OLIGOPOLY When a big player in the marketplace like Molsons or Microsoft begins to lose marketshare to a small upstart, they will often buy the entire company, sometimes friendly, sometimes hostile, in order to maintain profit levels An ironic example of this trend was when Coors purchased Molsons

MONOPOLY Rare, must have government support don’t have to be competitive in price (can operate at a loss if government supported) Often prices are regulated by one of the levels of government Disadvantage –service can deteriorate due to lack of competition –Can end up competing with privately operated businesses Advantage –May be the only way some services are supplied because they can never by profitable –Removes excess profit potential from some highly necessary services (water, sewer)

EXCLUSIVE CONTRACT producer has the sole right to provide good/service at a location in exchange for a fee Pepsi and Coke often negotiate exclusive deals with fast food chains Sports venues will have one brand of beer at their events

EXCLUSIVE CONTRACT e-top-partners-get-behind-london- 2012/134529http:// e-top-partners-get-behind-london- 2012/ Advantages –Usually very competitive bidding, lowers the initial cost for the product for the retailer Disadvantage –Limits choices for the consumer – coca-colahttp:// coca-cola The Olympic games often have official or exclusive contracts for high profile sponsors

GEOGRAPHICAL MONOPOLY due to location, a specific supplier of a good or service has the same advantages as a true monopoly Most rural communities will have some products or services with no direct competitors in the community Unless one is willing to travel, these providers have some of the same dynamics as true monopolies In Eckville, the COOP is the only local option for grocery purchases

GEOGRAPHICAL MONOPOLY Advantages –There is a local option to purchase the good or service in question –Only option for some consumers who cannot travel to other options beyond local community Disadvantages –The prices is these situations are often higher than competitors beyond the community, you often pay for the convenience