Why Share Market is good example of the perfect competition?

The stock market is an example of perfect competition in that everyone has the same chances of ups and downs in a certain market. Laws also help to ensure its perfect competition by making insider trading illegal. In theory, a stock market is perfect competition. However, in reality , it is actually an example of very poor competition. Both in laws and in  actual construction, stock market heavily favour those able to purchase super- high speed computers( and host them in the exchange itself), and also tend to restrict information to a privileged few while denying it to the majority of users.

The consequences is that a stock market actually is very imperfect competition, heavily favouring the established members of the exchange over the ordinary exchange trader.

As a technical term Economics, “Perfect Competition” is the ideal or theoretical market structure characterised by a large number of price taking producers with identical U – shaped cost curves(the minimum of the firm cost curve occurring at an outputs small in comparison with market demand), who
face no barriers to entry, producing a uniform product and selling it to a large number of price taking consumers, without collusion or price discrimination. The stock market is characterised by non-uniform
commodities ( shares in different companies) each with a monopoly supplier. If anything it’s an example of monopolistic competition, not perfect competition.

Author: Keshav Kumar KC

E-mail:keshabkc6@gmail.com