In economics, a market with many sellers offering identical products and no single seller controlling price is called perfect competition.
The textbook model of perfect competition assumes many buyers and sellers, a homogeneous product, free entry and exit, and widely available information. Because each individual firm is tiny relative to the market, it is a price taker: it accepts the market price rather than choosing a unique price for its product.
A perfectly competitive firm faces a horizontal demand curve at the market price. In the short run, it may earn a profit or loss, but entry and exit push economic profit toward zero in the long run under the model’s assumptions. Agricultural commodity markets are often used as approximate examples, although real markets rarely meet every condition.
Perfect competition differs from monopoly, where one seller dominates, and oligopoly, where a small number of firms are strategically interdependent. Monopolistic competition has many sellers but differentiated products.