PERFECT MARKETS AND IMPERFECT MARKETS

Abstract

The objective of this paper is to analyze Islamic teaching to promote market competition. It is important to analyze these Islamic teachings because the Islamic teachings provide a different approach and better than the conventional approach to promoting market competition. There are three Islamic teachings in promoting market competition. The first is motivating and encouraging sellers to compete continuously, the second is rejecting a state price and market mechanism intervention and the third is banning all the unfair transactions. All of the teachings will promote market competition. Sellers as the main participants of the competition intend to compete continuously and fairly. They will compete continuously with each other because motivated and encouraged to do so. The continuous competition will depend on sellers’ competency to compete because they cannot exploit government intervention. Also, they will compete fairly because all the unfair transactions are banned comprehensively and immediately. These Islamic teachings promote market competition, on one side, show that Islamic teachings are different and better than the conventional approach in handling competition to be a continuous and fair competition, and in the other side, show that a competitive market is not an imaginary one.