In economics the term competition is used to refer to different issues. In addition the term is very wide and thus it is separated into different categories. There is monopolistic competition, perfect competition, duopolistic competition and oligopolistic competition.Perfect competition refers to a hypothetical market where there is perfect information. Under such a situation all sellers have equal information to such an extent that there is no one of them who has the powers to influence prices. This notion of perfect competition is hard to come by since under normal circumstances this is not possible. Different types of competition influence prices in different ways.
There is a kind of competition that leads to a downward trend of prices, others lead to a stabilization of prices, while some forms lead to an escalation of prices as the firms involved compete to earn extra profits. In a duopolistic competition setup there are two competing firms. On the other hand in a monopolistic competition setup there are a number of firms who produce closely related goods although the goods are not homogenous. Under such conditions it becomes difficult for consumers to keenly differentiate the products.