We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Pure Competition?

Malcolm Tatum
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Also sometimes referred to as perfect competition, pure competition is a situation in which the market for a product is populated with so many consumers and producers that no one entity has the ability to influence the price of the product sufficiently to cause a fluctuation. Within this type of market setting, sellers are considered to be price takers, indicating that they are not in a position to set the price for their products outside a certain range, given the fact that so many other producers are active within the market. At the same time, consumers have little influence over the prices offered by the producers, since there is no singular group of consumers that dominates the demand.

In reality, pure competition is more theory than actual fact. While there are rare situations in which a marketplace functions with pure competition for a short period of time, the situation normally shifts as various factors change the stalemate created by a multiplicity of sellers and buyers. This is often due to the somewhat stringent set of factors that must be present in order for the competition to be considered perfect or pure.

There are several essential characteristics that define pure competition. One has to do with the balance of buyers to sellers. When there is an infinite number of buyers who are willing to purchase the products offered for sale by an infinite number of producers, at a certain price, the opportunity for anyone to take actions that shift the market price is extremely limited. The price remains more or less the same, and the same number of buyers purchase the products from the same range of producers.

With pure competition, sellers can easily exit or enter the marketplace, without creating any undue influence on the price. Consumers continue to make purchases at the same rate, even if two companies leave the market and only one new one enters. The collective producers who are still in the market simply continue to produce enough products to meet consumer demand, without a shift in market price.

Businesses engaged in a pure competition market usually structure production so that they incur marginal costs at a level where they can earn the most profit. When the product line is homogeneous, this means the products produced are essentially the same as the product line produced by other suppliers in the marketplace. Assuming the costs are in line with marginal revenue, the business can generate a consistent profit for as long as the condition of pure competition is present in the market.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By shell4life — On Jun 15, 2012

@cloudel – You're right about this being an example of pure competition. I see gas stations come and go now and then, but the price remains the same at all the other stations, so the shutdown of one doesn't have any effect on the prices at other places.

Personally, I do drive a few extra miles for cheaper gas. A few cents per gallon really adds up. My car holds 16 gallons, so I feel that savings of even 3 cents per gallon is significant.

If my favorite station closed, I would be sad, because I know that this wouldn't make the other stations lower their prices any. I would be stuck paying more for the same gasoline.

By lighth0se33 — On Jun 15, 2012

I live in a college town, and this place is overrun with pizza restaurants. The students keep all the places in business, and they all charge about the same for their food.

From time to time, one of the restaurants will offer a special price on a large pizza or some other deal to attract more business, but they cannot sustain this forever. Like it or not, they are under pure competition in the long run.

The good thing about having so many different pizza places is that they offer variety, and though a group of friends can't always agree on which place to order from, everyone has their favorite. This helps the restaurants stay in pure competition.

By cloudel — On Jun 14, 2012

The gasoline industry sounds like a good example of pure competition. No one can really have a much lower price than everyone else and still make a profit, because the cost for gas station owners to buy the gasoline is so high to begin with.

There are a couple of stations in my town that offer gas a few cents cheaper than the surrounding areas, but not everyone is willing to drive several miles to get there. For some people, it is just more convenient to pay a few cents more per gallon than to use the gas it would take to reach these stations and save on the product.

Barring the few cents difference that some stations are willing to give, there is pretty much pure competition in this market. I don't see that changing in the future, either.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.