Title: Pure Competition: Meaning, Characteristics
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Content: In other words, both producers and consumers do not have market power. Low entry barriers are also related to a large number of producers in the market. When a company goes bankrupt, market supply decreases, this will raise prices in the short run. However, due to low entry barriers, any increase in profits will encourage new players to enter. As a result, economic benefits in a pure market do not last in the long run. Homogeneous product and switching costs
Producers market homogeneous products. The company did not adopt a differentiation strategy for its offer. Therefore, there is no opportunity for them to apply a more premium price. Hence, competition in the market will be based on price and volume. Also, products on the market completely replace each other.