A Monopolistic Market Competition

The market is a place where the supply and demand of goods and services collide and are brought together as a group of buyers and sellers in a consistent and coordinated manner. This article explains the psychology of imperfect market competition, price changes and correspondence between buyers and sellers.

A Monopolistic Market Competition

Market Competition

The market is a process that determines the price of a single product or a group of products by regulating the relationship between sellers and purchasers, either through real or potential exchanges. We utilize the division of market structures as a starting point for understanding competition.

Types of Competition

1. Perfect or Complete Competition,

2. Imperfect or Incomplete Competition

1. Perfect Competition

It occurs when there are a large number of vendors and purchasers on the market for the same, homogenized product when all products have a price and are traded on the market, and market players have no control over the price at which they buy or sell. The price is a quantity that is objectively determined. The price change is a result of the behaviors of all sellers and purchasers, not of their acts. Individual producers, or so-called price-takers, are price contractors in properly competitive marketplaces. A fully competitive market is one in which all companies produce the same items and each company is so small that its production level has no impact on the entire industry or prices. In practice, such examples are uncommon, as in the production of wheat, corn, and oil, therefore imperfect competition prevails in most circumstances. When a buyer or seller can affect the price of a product, imperfect competition emerges. The genuine market is neither entirely competitive nor completely monopolized, but rather lies somewhere in the between.

2.Incomplete (Imperfect) Competition

Imperfect competitors are companies that have a considerable impact on the market pricing of their products. When individual bidders have some power over the pricing of their goods, imperfect competition prevails in the business. Unlike ideal competition participants, who only make decisions about the volume of production, price-taker participants or price-makers also make decisions about the price. Imperfect competition does not imply that a corporation has complete control over the price of its product; rather, it means that the company may only set the price within reasonable bounds. Furthermore, it necessitates the existence of a bigger or lesser number of producers, each of whom must have some market power, i.e. the ability to influence a product's price by adjusting output. Because modern technology allows for the mass production of vast quantities of goods, firms must lower their average costs. In practice, this means that one or more businesses will raise their output to the point where they account for a considerable portion of total industrial production. Since the admission of new competitors into such a market is followed by extraordinarily high expenses, larger corporations have an advantage over smaller competitors that is generally unreachable.

Legal Issues and Public Relations

1. Legal Issues (patent ownership, entry restrictions by granting concessions for the supply of an area, import restrictions)

2. Public Relations (building awareness of the product and loyalty to it, eg Coca-Cola)

Differentiating Products (production of a wide portfolio of products for a wide range of consumers)

Types of Imperfect Competition

1. Monopoly

2. Duopoly

3. Oligopoly

4. Monopolistic Competition

The Game of Monopoly

A monopoly (Greek monos = one; polist = seller) is the most extreme type of incomplete competition, in which one corporation has complete control over an entire economic sector and faces no competition for the goods or services it provides, resulting in complete market dominance. As a sort of market structure, a pure monopoly is distinguished by the presence of only one seller/bidder who is subject to the function of market demand. A monopoly's most important feature is that it has complete control over the price of the items it sells, regardless of the amount it sells. The most profitable market model is regarded to be a monopoly.


Duopoly is a type of imperfect competition in which only two economic organizations have complete control over the supply. It happens in industries where competitors have a hard time breaking in. Duopolistic items can be both homogeneous and distinct.


Oligopoly is a market structure that has numerous enterprises competing against one other and participating in the overall offer. Oligopolistic market dominance is a result of the small number of producers and the fact that each of them produces a considerable portion of the industry's overall product. They occur in industries when competitors find it difficult to enter and products are both homogeneous and differentiated, such as the automobile market. Participants in an oligopoly have a substantial impact on the financial formation, but unlike monopolies, they must be considerably more cautious because they are under the watchful eye of their rivals. They must act strategically and based on an understanding of their competitors' actions. As a result, oligopolists can prevent price reductions, and there may be a "tacit agreement" among all competitors to charge a monopolistic price, unlike markets where perfect competition prevails and bidders cannot affect the price but passively accept it. To make potential competitors unprofitable, oligopolies frequently set a price that is lower than the level that would maximize profits but yet more than their marginal cost.

Monopolistic Competition

Monopolistic competition is a market in which a large number of enterprises compete for the same customers by producing non-identical but similar goods.

Monopolistic competitors are not ideal alternatives due to product differentiation. Each brand is perceived differently by consumers, and this variation is due in part to the product's composition and in part to the consumer's perception of that product. Those seeking to enter or quit the market face no barriers due to monopolistic competition. New competitors are unrestricted in their entry into the market. Such markets sell soap, shampoo, and a variety of other items. Most retail products are in a similar predicament because they are offered in a variety of stores that compete with one another, varying their services based on location, staff availability and expertise, credit terms, and so on.

Two Characteristics of the Monopolistic Type of Market:

1. Businesses compete by offering unique items that are interchangeable but not perfect alternatives.

2. Market entry and leave are both free, making it reasonably simple for a new company to enter the market with its brands and quit if the items become unprofitable.


WEB: An Introduction to Business (v. 1.0) - Creative Commons Karen Collins, 4, 5, 6. 10, 11, ... https://2012books.lardbucket.org/books/an-introduction-to-business-v1.0/s05-05-monopolistic-competition-oligo.html

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