Pure competition and perfect competition

Pure competition is a marketing situation characterized by

• Large number of buyers and sellers
• All firms sell an identical product (the product is a commodity or homogeneous).
• All firms are price takers (they cannot influence the market price of their products).
• Market share has no influence on prices.
• Firms can enter or exit the market without cost.
• No transport costs
• No government intervention.

Perfect competition is a market structure characterized by

• Large number of buyers and sellers
• All firms sell an identical product (the product is a commodity or homogeneous).
• All firms are price takers (they cannot influence the market price of their products).
• Market share has no influence on prices.
• Firms can enter or exit the market without cost.
• No transport costs
• No government intervention.
• Buyers have complete or perfect information (in the past, present, and future) about the product being sold and the prices charged by each firm.
• Capital resources and labour are perfectly mobile.

NB. The last two characteristics distinguish perfect competition from pure competition