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Imperfect 
competition 
The term 'imperfect competition' apples to any market that is not perfect. As we 
explained above, almost all markets are imperfect, although the degree to which they 
are imperfect can vary significantly.
Monopoly 
A monopoly describes the situation where a market has only one producer. That is 
the pure definition, although the term is often used to describe a firm that has a very 
high share of a market. 
A monopoly may come about because the producer has a statutory right to be the 
only producer, perhaps a 'state owned enterprise'. 
If left uncontrolled, a monopoly can set its own price in the marketplace, which can 
result in what economists refer to as 'super-normal profits'. For this reason, 
monopolies are usually subject to control by government or a government agency. 
Oligopoly 
An oligopoly arises when a market has a few dominant producers. Each of the few 
producers has a high level of influence – and a high level of knowledge of their 
competitor strategies. If an oligopoly has only two firms, it is referred to as a duopoly. 
Oligopolistic markets are often characterised by complex product differentiation, 
significant barriers to entry and a high level of influence on prices.
An example of an oligopoly is the retail petrol and diesel market – several large 
companies including Exxon Mobil, Shell and BP control the majority of the market 
(although fuel outlets linked to supermarkets are gaining market share). An example 
of a duopoly would be the two major cola producers, The Coca-Cola Company and 
Pepsi Co. 
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CHAPTER 4
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MICROECONOMIC FACTORS 
 
117 
Type of market 
/ competition 
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