What Are the Four Types of Competition in Business?

CGIBackgrounds.com/CGIBackgrounds/Getty Images

The four types of competition in the field of business are pure competition, imperfect competition, oligopoly and monopoly. There is also a variation called monopolistic competition.

In an environment of pure competition, there are no barriers to entering the market. There are multiple sellers and no single company or group of companies dominates the market. Consumers can buy the products or services easily and choose from a number of different suppliers. The products or services themselves are easily replaced by those of another competitor and prices are set by what the market is willing to pay. Small businesses such as convenience stores are an example.

Imperfect competition is similar to perfect competition in that there are multiple sellers and no barriers to entering the marketplace. The difference is that the sellers are offering essentially the same product with variations in quality and price. The restaurant business in an example.

In an oligopoly, a limited number of companies compete for clientele. The product in question may be differentiated between companies or exactly the same. There are significant barriers to entering the marketplace which keep most other companies out. It also means that most companies will be large and similar in size. The banking industry is an example.

In a monopoly, there is only one business operating in a sector without any competition. This may be based on ownership of resources or a patent. Monopolistic competition involves a market dominated by one large company but where there may be other smaller companies as well.