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Perfect competition

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Definition of Perfect competition

Perfect Competition Image 1

Perfect competition

An idealized market environment in which every market participant is too small to affect
the market price by acting on its own.



Related Terms:

Capital market imperfections view

The view that issuing debt is generally valuable but that the firm's
optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net
corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of
asymmetric information, asymmetric taxes, and transaction costs.


Competition

Intra- or intermarket rivalry between businesses trying to obtain a larger piece of the same
market share.


Expected value of perfect information

The expected value if the future uncertain outcomes could be known
minus the expected value with no additional information.


Perfect capital market

A market in which there are never any arbitrage opportunities.


Perfect hedge

A financial result in which the profit and loss from the underlying asset and the hedge position
are equal.



Perfect market view (of capital structure)

Analysis of a firm's capital structure decision, which shows the
irrelevance of capital structure in a perfect capital market.


Perfect market view (of dividend policy)

Analysis of a decision on dividend policy, in a perfect capital
market environment, that shows the irrelevance of dividend policy in a perfect capital market.


Perfect Competition Image 2

Perfected first lien

A first lien that is duly recorded with the cognizant governmental body so that the lender
will be able to act on it should the borrower default.


perfection standard

see ideal standard


Perfectly competitive financial markets

Markets in which no trader has the power to change the price of
goods or services. perfect capital markets are characterized by the following conditions: 1) trading is costless,
and access to the financial markets is free, 2) information about borrowing and lending opportunities is freely
available, 3) there are many traders, and no single trader can have a significant impact on market prices.



 

 

 

 

 

 

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