What is a Perfect Market?

A perfect market is market that is structured to have no anomalies that would otherwise interfere with the best prices being obtained. Examples of this perfect market structure are as follows:

A large number of buyers. Having many buyers increases demand, and so introduces pressure for prices to increase.
A large number of sellers. Having many seller increases supply, and so introduces pressure for prices to decline.
Products are homogeneous. There are no differentiating features between products that would support price differences between them.
Information is freely available to everyone in the market. With access to the same information, everyone is buying and selling based on identical sets of data.
There is no collusion between the market participants.
Every participant is a price taker, not having the ability to influence market prices.

It is generally not a good idea to be a seller in a perfect market, because prices are driven down so low that it is quite difficult to generate a reasonable profit. Consequently, many sellers seek out less perfect markets, where they can realize higher profit levels.

Examples of Perfect Markets

There are few perfect markets; those selling commodities, such as agricultural products and minerals, represent the closest approximation of a perfect market.