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What Is an Open Market?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 28 September 2014
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An open market is a type of market situation in which widespread access to different participants is present. In this sense, the market is very much like a free market situation, in that there are very few obstacles to active participation by a wide range of consumers and providers. A market of this type is not limited by criteria such as legal or financial requirements that participants must meet before being allowed to buy and sell in the marketplace. While a truly open market situation is extremely difficult to achieve in today’s worldwide marketplace, the term is often used to describe any market that is relatively free of barriers like tariffs or taxation that is considered prohibitive.

Determining just how accessible an open market really is normally involves evaluating the influence of three basic criteria on that marketplace. The nature and scope of government regulations that impose tariffs or taxes is important, since restrictive taxation limits help to determine who is able to participate in the market. Competition in the marketplace is a distinguishing characteristic, with markets in which competition is active and encouraged considered more open than markets where a few businesses dominate the landscape. A third factor has to do with the influence of cultural factors such as religion that may either promote a more open market or prevent the involvement of entities that are not connected with the dominant culture.

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The idea behind an open market is to allow full participation by any entity that wishes to be involved in the buying and selling process. Proponents of this approach claim that this degree of openness is beneficial for the economy, since consumers and buyers participate at whatever level their financial resources allow. In theory, this means that anyone is free to be involved and benefit from that participation, a situation that ultimately improves the standard of living for all parties that are active in the marketplace.

Critics of the open market tend to favor restrictions as a means of preventing the marketplace from becoming unstable. Here, the intervention of governments by means of establishing standards and regulations that govern the market, and enacting various taxes and tariffs that must be paid in connection with specified purchases and sales, is seen as a means of increasing the chances that events such that led to the worldwide economic depression of the 1930s do not recur. Sometimes known as protectionism, this strategy does not object to competition in the marketplace or the involvement of anyone who has the resources to participate, but does believe that restrictions are necessary in order to protect the interests of everyone concerned.

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EliseP
Post 1

So, basically, an open market is a market that is competitive and accessible by all investors and consumers without restrictions?

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