The Curse of Competitive Market

Market is the place where uncertainty never dissapeared. Though people can’t determine the activity of the market perfectly, people still can predict market activity with enough financeducations. As we know, there are many type of market such as perfect competition, monopoly, oligopoly, monopolistic competition, and monopsony. Every type of market are not stand alone in economy. They combined together to create economic activity within the countries and worldwide.

In term of monopolistic competition market, monopoly and perfect competition take place in one type. Like a perfectly competitive market system, there are numerous competitors in the market. The difference is that each competitor is sufficiently differentiated from the others that some can charge greater prices than a perfectly competitive firm. An example of monopolistic competition is the market for music. While there are many artists, each artist is different and is not perfectly substitutable with another artist.

Monopolistic competition market is the closest type of market which can create the curse of competitive market. The curse of competitive market is the principle in term when a project, product, or any other business and financial instrument are easy to make profit, there are always a significant increase in supply. Therefore, it makes unbalance in supply curve, which decrease the amount of profit in business and financial instrument without the support of demands.

In 10 principle of financial management, the curse of competitive market is often forgotten. In my opinion, maybe it because of people can minimize the curse of competitive market with finance some sources in marketing (not pushing the curse, but strenghtened branding to win the competition). A good marketing may push the competitors away because people’s trust in branding. For example, in smartphone market, many manufacturers produce the same specs in one smartphone. But only one or two manufacturers can rise on the top. The one who can reach the top of sales indicates that they overcome the curse of competitive market.

I believe there are many other case that can be discussed in this topic. We will discuss more specifics in another post. Thanks for coming to the financeducations.