Monday, 4 July 2022

What is the meaning of monopolistic competition and features?

 The structure of the monopolistic market refers where is the number of firms situated in the market for a similar type of product but they are no substitute for the product for example toothpaste, Air conditioner, soaps, and many more. Under monopolistic competition, each firm is the sole producer of a particular product or brand. The monopolistic market aims to deliver the best product to the consumers because there are several types of similar products and consumers have many choices available in the market. For illustration, there is a lot of brand of toothpaste-like pepsodent, Colgate, neem, babool, and many more. On the one hand, the toothpaste market seems to be full of competition because of the thousands of brands and they have freedom of entry. On another hand, all the existing brands are a little different from one another and have the power to charge different prices. This type of market is good for the consumer because they have a lot of choices and the liberty of selecting commodities according to their requirements. There are a lot of features of this kind of market that are underlined below. 

Numerous sellers 

There are large numbers of firms selling similar products. Each firm acts independently and covers a limited share of the market. So an individual firm can control a limited part of the market and market price also. This will help maintain healthy competition in the market. 

Product differentiation 

Each firm can establish some degree of monopoly market because of product differentiation. Product differentiation refers to differentiation in the product based on brand, packaging, name, and many more. The product of the firm is close, but not the perfect substitute for the other firm. 

Product differentiation implies that buyers of a product differ between the same kinds of products produced by distinct firms. They have the liberty of charging a different price for the same product produced by different firms. This thing gives some monopoly power to firms to influence the market price of the product. 

Exploring some important points regarding product differentiation.

  • The product of each firm should be distinguished from the products of other firms due to product differentiation. 
  • A similar use of the product should be selling their product with a different brand name like a dove, lux, lifebuoy, and many more. 
  • Product differentiation allows firms to for creating a monopoly in the market. 
  • There are two types of product differentiations first real and the other one is imaginary. The real difference may be due to differences in shape, flavor, color, sale services, and many more. Imaginary difference contains consumer beliefs like cost difference, quality difference, and many more. 
  • The most important product differentiation is the brand image if the brand name is huge then product consummation is also high and covers a large part of the market. 

Selling cost

Under monopolistic competition, products are differentiated and these differences are made by the buyers through the cost of the product. Selling price refers to covering all expenses incurred for production and reaching for a market like promotion of the product, advertisement, and many more. Cost plays an influencing role in buying products of a particular brand in comparison to other available brands. Due to this reason, selling costs are always a substantial part of the total cost under monopolistic competition. 

Many times businesses face a lot of competition because of the selling cost. But at the same time in monopoly market does not face any competition because of the price.

Liberty to enter and exit the market  

Under monopolistic competition, firms have the freedom to enter and exit the market according to their convenience. It ensures that there is no compulsion to run any business in abnormal losses incurred in the business. It must be noted that in the monopolistic market it is not easy to face the completion and very tough to establish a brand in the market. 

Lack of perfect knowledge 

Buyers and sellers do not have perfect knowledge about the market condition and fail to analyze the market. Selling the cost of products creates imaginary superiority in the mind of consumers and it became very difficult for the consumer to evaluate the difference between similar products. Thus, the consumers buy the particular product at whatever cost even if the other less priced products are available in the market. 

Pricing decision 

Enterprises in a monopolistic market are neither price takers nor price makers. If the business manufactures a unique product and establishes a particular reputation in the market then they have partial control over the price of the product. The power of price making is depending on how the buyer can attract consumers for consuming this brand. 

Non-price competition

The non-price competition also exists in the monopolistic market. Non-price competition refers to the competition of prices of similar use products with different firms. There is strategy are adopted by the business for attracting

Consumers like gifting items, credit offers, vouchers to consumers, and many more without changing the price of their product. 

Under monopolistic competition, business adopts various ways of attracting large audiences like price competition and non-price competition.   


In this article we discussed about monopolistic market in the industries. Monopolistic market plays important role for business and consumer because it helps to maintain balance in availability of goods with different prices and distinct features as well.








No comments:

Post a Comment

Six most important functions of the entrepreneur concerning economic development

  The entrepreneur is the most important person who organizes the production process in the business. Other than this function, all other re...