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While discussing different market models, one should remember that each has its own benefits and drawbacks for customers and businesses. Among the four primary models of market competition: perfect competition, monopolistic competition, oligopoly, and monopoly, some can bring more profits to companies, while others may be more advantageous to buyers.
While interpreting these types from a customer’s perspective, perfect competition may be outlined as the most beneficial one. This model does not exist in reality, but its environment and the lack of companies’ influence on costs would allow clients to see a price that is completely transparent (Stiglitz & Rosengard, 2015). This approach also does not permit firms to establish their own rules for the industry which limits the costs and presents many options for the buyer. Although the range of products from each seller could be virtually the same, the final price would be low and fair.
Other models imply that some type of profit will be awarded to companies with a more significant influence on the market. For example, in the case of oligopoly, a group of firms may decide to collaborate and raise prices for all products in the industry, forcing customers to spend more money as a result. Similarly, a monopolistic market occupied by one seller can also lead to unfair prices, where the actual value of goods is much lower than their cost. Finally, a market with monopolistic competition is not as disadvantageous as the other two. However, it still has companies that affect the prices rather significantly (Mahoney & Weyl, 2017).
It is possible to argue that such competition may present a bigger number of options from which customers can choose. However, the range of possible choices may be artificial – based not on actual quality but some non-essential details. On the other hand, the perfect competition presents a model from which a buyer can benefit financially.
Mahoney, N., & Weyl, E. G. (2017). Imperfect competition in selection markets. Review of Economics and Statistics, 99(4), 637-651.
Stiglitz, J. E., & Rosengard, J. K. (2015). Economics of the public sector (4th ed.). New York, NY: WW Norton & Company.