Betting on Perfect Competition
One of the annual rituals for A2 Economics teachers is the lesson when we cover the assumptions that lie behind the model of perfect competition and ask the perennial question - are there any real-world industries that come close to this particular market structure?
In the past I have used local fruit markets, clusters of nightclubs or bars in busy tourist venues and auctions for newly caught fish as examples of markets which satisfy some of the criteria needed for perfect competition to exist. It allows one to discuss the importance of low entry and exit costs into and out of the market; the significance of many sellers supplying essentially homogeneous products and the role that price transparency plays in shaping the incentives of buyers and sellers.
A colleague suggested to me a few weeks ago that his local racecourse provided a suitable example to use. He is often to be found at summer and early autumn meetings after school in the evening, enjoying the occasional bet, a stunning location but more importantly the chance to watch competitive markets in action - namely on-course betting!
