The characteristics of firms operating

Firms in a completely competitive market

Firms in a completely competitive market are price takers, there are no obstacles to entry and exit, they sell a homogeneous product, their market share is relatively small, and they incur modest mobility costs. Furthermore, in a perfect competition, both buyers and sellers have access to perfect product information (Thampapillai, 2010). In terms of profit, sellers can only make abnormal gains in the short term, but only normal earnings are attainable in the long term.

e-Bay’s Features in Relation to Perfectly Competitive Market

e-Bay is one of the companies with features that are closely related to a perfectly competitive market. When compared to competing items, their products make it easier to receive perfect information (Pettinger, 2010). On the other hand, there are lower barriers to entry in the internet-based companies and e-Bay makes normal profits in the long-term as customers can compare prices from other dealers. Hence, this translates to the characteristics of being a price taker.

Limitations of e-Bay as a Perfectly Competitive Company

However, e-Bay does not fully fit the description of a company operating in a perfectly competitive market. One of the reasons is because the products by e-Bay have a differentiation when compared to those of other competitors and mainly with regard to brand identity. Similarly, there is differentiation when it comes to the quality of these products. On the other hand, despite there being little government regulation in the market where e-Bay operates, the most common barrier surround entry into the market as they entail high start-up costs (Pettinger, 2010). Registering a company as e-Bay to become a limited entity entails huge costs. Hence, it is evident that perfect competition is not feasible in the real world as many impediments are present in the economy which prevent the actual traits of such a market from prevailing.

References

Pettinger, T. (2010). Ebay and Perfect Competition | Economics Help. Economicshelp.org. Retrieved 23 June 2017, from http://www.economicshelp.org/blog/2379/economics/ebay-and-perfect-competition/

Thampapillai, D. (2010). Perfect competition and sustainability: a brief note. International Journal Of Social Economics, 37(5), 384-390. http://dx.doi.org/10.1108/03068291011038963