Competition
Competition: the way firms behave in the market place and how they respond to the actions of other suppliers and consumers. Underlying the idea of competition is the assumption that supply and demand are limited, at least in the short term, and that firms must strive obtain their share of the available resources. In ideal conditions, competition between firms would be based on price and the ability to innovate and respond to changes in the market. There would be no impediments to the operation of the price or market systems. In the real economy, human ingenuity, high entry barriers to some industries, efficiencies of scale obtainable from large-scale operations and other factors combine to impair perfect competition in various ways. This may lead to economic rents being accorded to some firms, but without any obligation on their part to let the consumer benefit from this situation. Governments recognize this, and in many countries they seek to protect, where necessary, competition through antitrust laws and competition policy. Most economies are becoming internationalized, and government approaches to trade policy, i.e. their assessment of the extent to which foreign firms and their products should be allowed to compete in the market, therefore can be of critical importance to the level of competition prevailing in the market.
Source: http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf
Web site to visit: http://ctrc.sice.oas.org
Author of the text: W. Goode
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