This week in class, we learned about the concept of perfect competition in the markets. In a world in which perfect competition exists, there would be many sellers, many buyers, identical goods, no barriers to entry or exit, perfectly symmetrical information, and no built in advantage of established firms over newcomers. Another idea is that “Firms all look the same to the buyer,” which is not enough because as consumers, we cannot see the barriers to entry/exit or asymmetrical information. In conclusion, the standards for a market having “perfect competition” are so high and slightly unrealistic that this idea has become mostly theoretical in the economic world.
However, I tried to rattle my brain for the most perfectly competitive market I could think of. I then thought of St. Maarten, a place I visited while taking a cruise last year. They had a huge lot filled with vendors and locals selling tons of goods to tourists. I wanted to buy something for my mom, so I began looking at pretty hand painted wind chimes. The lady of course lowered the price for me, and I bought it. As I continued walking, I saw the same exact “hand painted” wind chime at about 15 other tables.
I believe these street vendors had the closest thing to a perfectly competitive market I personally had ever seen. There were tons of tourists, buyers, and locals, the sellers. For the most part, all their goods were identical (I learned that the hard way). I can only imagine that the newcomers are not at a disadvantage because I could not tell who had been selling for 10 years or had just started that week, because all their tables virtually looked the same. The only issue was the “buyers and sellers enjoy perfect information” criteria; which as a buyer, I was not aware of any asymmetries going on around me.
In conclusion, no market is ever going to be perfectly competitive, which is why it is thought of as more of a theory or concept in today’s world. Yet, the street vendors of St. Maarten are a good example of a market somewhat close to having perfect competition.
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I experienced the same situation at the Bay Street market in Nassau, Bahamas this year. I would agree that it is close to a perfectly competitive market with the inability to research the vendors and therefore everyone looks the same to the buyers. The concept of a perfectly competitive market is otherwise something that many markets can be compared to on certain levels but most don't meet all of the qualifications.
ReplyDeleteI experienced the same in St. Marten, when I visited there last year. It's one of the ultimate places to buy hand made items. I enjoyed your post because you listed real world itemsand St. Marten was a good one.
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