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Significance of imperfect competition models for explaining the pattern of international trade - Essay Example

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Author : mosesritchie

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This paper analyses the significance of imperfect competition in the market as far as international trade is concerned. In an imperfectly competitive market, firms may have some power in the market as far the fixing of the prices of its commodities is concerned…

Extract of sample
Significance of imperfect competition models for explaining the pattern of international trade

The researcher states that international trade is growing day by day as a result of globalization and liberalization policies implemented by different countries at different parts of the world. The major obstacles for the smooth flow of goods and commodities between different countries have been diminished a lot as a result of globalization. At the same time one of the major problems associated with international trade is the fact that the problems happened in one part of the world can have detrimental effect in other parts of the world as well. Competition is growing immensely in the market as a result of the rapid growth of international trade. Ideally, all organizations would like to have some kind of monopoly or some kind of control over the price mechanisms in the market. However, growing competition prevent organizations from controlling the market effectively. Competition in the market can be labelled as perfect competition and imperfect competition. Perfectly competitive markets refer to the markets in which the firms do not possess any market power whereas in imperfectly competitive markets, some organizations definitely have control in the market as far as price mechanisms are concerned. “Competitive markets provide strong incentives for good performance - encouraging firms to improve productivity, to reduce prices and to innovate; whilst rewarding consumers with lower prices, higher quality, and wider choice” whereas imperfect competition denies all these things. ...
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