What Is a Perfectly Competitive Market?

The perfectly competitive market model can help you achieve highly targeted marketing, stronger relationships, and more sales.

In this article, you’ll learn what a perfectly competitive market looks like and how it helps you engage customers without slashing your prices.

A Perfectly Competitive Market Defined

A perfectly competitive market is an economic structure in which many businesses sell identical goods. There are no startup costs or legal restrictions.

It’s a theoretical market structure in an ideal-world scenario that couldn’t possibly exist in the modern market.

Perfect competition (otherwise known as pure competition) is unrealistic. But it’s a useful model for explaining how supply and demand impact prices and buyer and seller behavior.

Perfect competition is the opposite of a monopoly. A monopoly is where a single firm provides a unique product and high entry barrier to prevent other suppliers from competing. This could be costs and legal requirements.

For instance, utility suppliers such as natural gas and electricity companies are natural monopolies because it’s difficult for new suppliers to break into the market and provide the same services at lower costs.

In a monopolistic market, buyers have one option. Sellers have the market power to control pricing. Monopolies are also mostly illegal in the 21st century.

In reality, all markets fall somewhere between perfect and monopolistic competition. Both are benchmarks for comparing real-life market...