MONOPOLISTIC COMPETITION

A.

Definisi

Suatu struktur pasar dimana terdapat beberapa atau banyak penjual yang menjual produk yang sama, tetapi sedikit memiliki perbedaan dalam produknya. Setiap produsen dapat mengatur harga dan kuantitas produknya sendiri tanpa mempengaruhi pasar secara keseluruhan. A market structure in which several or many sellers each produce similar, but slightly differentiated products. Each producer can set its price and quantity without affecting the marketplace as a whole. http://www.investorwords.com/3111/monopolistic_competition.html (25 november 2011, 13:14)

B.

Karakteristik

There are six characteristics of monopolistic competition (MC):

Product differentiation

MC firms sell products that have real or perceived non-price differences. However, the differences are not so great as to eliminate other goods as substitutes. Technically, the cross price elasticity of demand between goods in such a market is positive. In fact, the XED would be high.[7] MC goods are best described as close but imperfect substitutes.[7] The goods perform the same basic functions but have differences in qualities such as type, style, quality, reputation, appearance, and location that tend to distinguish them from each other. For example, the basic function of motor vehicles is basically the same - to move people and objects from point A to B in reasonable comfort and safety. Yet there are many different types of motor vehicles such as motor scooters, motor cycles, trucks, cars and SUVs and many variations even within these categories.

Many firms

There are many firms in each MC product group and many firms on the side lines prepared to enter the market. A product group is a "collection of similar products".[8] The fact that there are "many firms" gives each MC firm the freedom to set prices without engaging in strategic decision making regarding the prices of other firms and each firm's actions have a negligible impact on the market. For example, a firm could cut prices and increase sales without fear that its actions will prompt retaliatory responses from competitors.

How many firms will an MC market structure support at market equilibrium? The answer depends on factors such as fixed costs, economies of scale and the degree of product differentiation. For example, the higher the fixed costs, the fewer firms the market will support.[9] Also the greater the degree of product differentiation - the more the firm can separate itself from the pack - the fewer firms there will be at market equilibrium.

Free entry and exit in the long run

In the long run there is free entry and exit. There are numerous firms waiting to enter the market each with its own "unique" product or in pursuit of positive profits and any firm unable to cover its costs can leave the market without incurring liquidation costs. This assumption implies that there are low start up costs, no sunk costs and no exit costs. The cost of entering and exit is very low.

Independent decision making

Each MC firm independently sets the terms of exchange for its product.[10] The firm gives no consideration to what effect its decision may have on competitors.[10] The theory is that any action will have such a negligible effect on the overall market demand that an MC firm can act without fear of prompting heightened competition. In other words each firm feels free to set prices as if it were a monopoly rather than an oligopoly.

Market Power

MC firms have some degree of market power. Market power means that the firm has control over the terms and conditions of exchange. An MC firm can raise it prices without losing all its customers. The firm can also lower prices without triggering a potentially ruinous price war with competitors. The source of an MC firm's market power is not barriers to entry since they are low. Rather, an MC firm has market power because it has relatively few competitors, those competitors do not engage in strategic decision making and the firms sells differentiated product.[11] Market power also means that an MC firm faces a downward sloping demand curve. The demand curve is highly elastic although not "flat".

No Buyers and Sellers have perfect information

No sellers or buyers have complete market information, like market demand or market supply

http://en.wikipedia.org/wiki/Monopolistic_competition

C.Keuntungan dan kerugian D.

Contoh pasar monopolistic competition