From Competition to Imperfect Competition: A Continuum
Perfect competition does not really exist. It is unlikely that you will find an industry in which all of the conditions for perfect competition are met. However, perfect competition provides an example with which to compare the market structures that do exist. Although it isn't real, it provides a nice frame of reference.
The continuum of market structures can be seen as an evolution of markets. Firms may begin in a very competitive market and over time become monopolists. The late nineteenth and early twentieth centuries witnessed the rise of the trusts from once-competitive industries. Some even called for an end to “ruinous competition.”
Most firms face barriers to entry, either in terms of cost or government requirements. Firms rarely deal in identical products, as they invest heavily in differentiating themselves from the competition. This ability to differentiate gives firms some ability to affect prices. In mature markets like the United States, firms tend to be large and not necessarily independent. Finally, access to information is not equally shared, and as a result, the condition of perfect information does not exist either. What you are left with is not perfect competition but imperfect competition.
Economists classify markets according to their level of competition. On one end of the spectrum lie perfectly competitive, albeit fictional, markets. On the other end of the continuum lies monopoly. In between you will find the market structures that are most familiar: monopolistic competition and oligopoly.
