One example of an industry that is considered as a quasi or near perfect market is the agricultural commodities market. In this market, products such as wheat, corn, soybeans, and other agricultural goods are traded.
While the agricultural commodities market exhibits some characteristics of a perfect market, it does not meet all of the criteria. The following are some characteristics of a perfect market that are not fully met in the agricultural commodities market:
1. Perfect information: In a perfect market, all participants have access to complete and accurate information about prices, quantities, and market conditions. However, in the agricultural commodities market, information may not be perfectly accessible or transparent. Factors such as weather conditions, government policies, and global supply and demand can impact prices, and this information may not be equally available to all participants.
2. Large number of buyers and sellers: A perfect market requires a large number of buyers and sellers, none of whom have the power to influence prices. While the agricultural commodities market has numerous participants, there can be instances where a small number of large agricultural companies or producers have significant market power, affecting prices and market dynamics.
3. Homogeneous products: In a perfect market, products are identical or highly similar, and buyers perceive no differences between them. However, in the agricultural commodities market, products can have variations in quality, grade, and origin. Buyers may have preferences for specific characteristics, and this can introduce some level of differentiation.
4. Low barriers to entry and exit: A perfect market allows easy entry and exit for firms, ensuring that new competitors can freely enter the market and existing firms can exit without significant obstacles. In the agricultural commodities market, there can be barriers to entry related to factors such as land availability, capital requirements, and government regulations. These barriers can limit the ease of entry for new participants.
5. Lack of market power: In a perfect market, no single buyer or seller has the ability to influence prices or market outcomes. However, in the agricultural commodities market, certain entities, such as large food processing companies or major retailers, may have significant market power. They can negotiate prices and terms with producers, affecting the overall market dynamics.
While the agricultural commodities market may not perfectly meet all the characteristics of a perfect market, it still exhibits some level of competitiveness, with numerous participants engaging in trading activities. The quasi or near perfect market nature of the agricultural commodities market reflects its relatively high level of competition and the influence of various market forces.