In
economic theory,
perfect competition (sometimes called
pure competition) describes markets such that no participants are large enough to have the
market power to set the price of a
homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets. Still, buyers and sellers in some
auction-type markets, say for
commodities or some financial assets, may approximate the concept. As a
Pareto efficient allocation of economic resources, perfect competition serves as a natural benchmark against which to contrast other market structures.