SYLLABUS OF 2nd LECTURE
7. 10. 2019
PharmDr. Bc. Dana Mazankova, Ph.D.
Competition on the market - perfect and imperfect competition,
price and non-price competition
Private and non-private estates
Externalities
Competition on the market
2 types of competition on the market:
1.Competition between suply and demenad
2.Competition on the supply side
• Analysis of the SUPPLY from „market structure“:
 setting prices
 setting outputs
 making its own profits
Competition on the supply side
Dividing of competition according to producers position:
1. Perfect competition
2. Imperfect competition
Dividing of competition according to used instruments of competition conflict:
1.Price competition
2.Non-price competition
Perfect competition
Situation in „ideal“ conditions:
- Conditions equity for all market subjects
- There are a lot of subjects on the supply side
- There exist free entry to a market
- Production is identical
(quality of the same product from various producers)
Imperfect competition
Situation in „real“ conditions:
- Unequal conditions for all market subjects
- There no exist free entry to a market
- Production is not identical
(quality of the same product from various producers)
- Subjects on the supply side (producers) realize their benefits
3 forms of imperfect competition:
1. Monopoly
 one company
2. Oligopoly
 small group of producers
3. Monopolistic competition
• great group of producers
Price competition
Producers compete through product price:
2 ways how to compete by a price:
1. Decreasing of cost
2. Realisation of bigger amount of production from the same costs
• price decreasing should also results from:
▫ domination of supply over demand
Non-price competition
Non-price tools:
• Production quality
• More extensive sale-conditions
• Advertisement
• Brand-name
• Positive brand reputation („Goodwill“)
Estates
= product or service for own consumption
Private estate
- payment for a estate
- Principle of „rivality consumption“
- Examples:
 car - car purchase
 medicine - drug purchase (using antibiotics during
bacterial infection)
Non-private (public) estate
- Principle of „non-rivality consumption“
- Examples:
 road - usage of road
 radio wave - listening of radio
 TV signal - watching TV
 information received in public lecture
- participation in public lecture
Mixed estate
• exclusion of another consumer from possibility of usage
• collective consumption do not decrease its benefit
- Examples:
 physician's service – patient visit a physician in a hospital in his
ambulance and receive health care (consultation, medical examination)
 pharmacist's service – patient visit a pharmacist in a pharmacy and
receive information concerning using drugs / consultatioin in the frame
of provided pharmaceutical care
Externalities
= subject (person or company) make an action, which has impact to
another subject (person or company).
This subject need not to pay for it,
or is not payed him for it (must pay for it).
Positive externalities
- producing of: external benefit
- Examples:
• building up of a new public electricity decrease cost needed for lightening
a back yard by a person
Negative externalities
- producing of: external cost
- Examples:
• chemical factory produces contaminated water, people living in the
neighbourhood must build up water-purifiers at their lands for own costs