why study perfectly competitive market if it does not exist in real world?

Answer 1

I think you are on to something. In some ways studying such utopias, like they say about a bit of knowledge, is dangerous. Many start throwing around the concepts from perfect competition as if we have that and it is what is going on. On the other hand, we study it based on a couple of things. One, to make economic theories as scientific as possible, you are examining things under lab conditions, because you can't study it in real life situations. Two, Economists actually do compare it to faults within our world, like Monopolies and externalities and government policies. Three studying perfect competition gives us and idea in the way things generally are going to work in our world, most of it isn't proven in exact measures.

Answer 2

Does Perfect Competition Exist

Answer 3

Well, no. Perfect competition requires homogenous products--that is, all nearly the same (perhaps you just had those two words reversed in your mind?). And in real estate, location is everything, so the products are very different as you go from one location to another. On the other hand, information is this market is exceptionally good, there are many, many participants, and the only real barrier to entry is raw captial, so it's probably more perfectly competitive than many markets. It's probably more perfectly competitive than the market for, say, computer operating software, or for airline transportation, or for waste disposal service, to name a few random examples. It's probably less competitive than the market for soy futures or pork bellies.

Answer 4

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RE:
why study perfectly competitive market if it does not exist in real world?

Answer 5

Well, consider this, what if you changed the parameters of the question.

Change the question to: I wish to study ways I can successfully compete in the marketplace. How can i make my company successful? How can I provide better value for the money to my customers and more importantly, communicate it to my customers.

You also raise a really good point. In many cases the market is not truly competitive. I used the word truly instead of perfect because I believe the marketplace is not truly competitive let alone perfectly competitive.

Regardless, we have to operate in the real world. Not competing is not an option. You must compete no matter whether you hold a job, have a career or run a business.

I agree with you, it is of no use. However, if you want to survive you must study how to compete in an unfair environment and furthermore act ethically yourself.

I have found several principles that are ethical and help you compete. The first and most important is friends and allies. You must make friends and allies no matter what you do for a living. Your friends realize that you have value to them as well. When one is attacted people will know that you have resources through your friends to fall back on. Furthermore, when one of your friends is attacked, your friend will know that you will be there for them.

Example there are a group of us who are friends. We are journalists. When one was fired we all worked to find him or her a new job. You have to have that network.

The second is money. I'm not talking about bribes. But there are certain suppliers, certain customers, certain employees who are essential to the success of your business. The time will come when one of them will need a break. They can't pay you now but you extend them credit. You gain an ally and money and capital when you need it. You need to study about turnover and cashflow. Both inventory turnover and cashflow do not exist in a vacuum. When an essential customer, supplier is a victim of poor timing of cash flow and inventory turnover, it pays dividends to be sympathetic.

You need to constantly know what your customers want. Trends change. Marketplace is just another word for knowing your customers and stuying them as closely as a biologist would study the habits of a deer or an elk. He or she observes all the time and what they look for is changes in behaviour and when a change of behaviour occurs they try to find out why. You must go one step further. You must know the second your customer wants something different, you have to find out why so you can fully meet their needs and get to them with a new product before your competition does.

I'm not into business and economics, you can probably think of more acedemic and more valid reasons, but I do think it is imperitive to study the marketplace for the very reason that it is imperfect.

Answer 6

competition is human,as long as we exist there will be competition and as long as we rule the world there will be competitive market,but i think you should open up a discussion about what people think about competition

Answer 7

In short, it shows you a benchmark as a reference point.