Monopolistic Competition

Presented To : Presented By :
Ruchir Sir Hiren Malani (42)
Kuldip Chosaliya (10)
BBA SEM-1
Meaning...
Monopolistic competition refers to a market
situation in which there is large numbers of firms
sells closely related but differentiated products.
Markets of products like soap, toothpaste, AC,
etc. are examples of monopolistic competition.
Cont’d
Monopoly + competition = Monopolistic
competition
Here each firm is the sole producer of a particular
brand or “product”.
It enjoys ‘monopoly position’ as far as a
particular brand is concern.
 Examples of
Monopolistic Market :
toothpaste Market
features
 Large numbers of sellers : There are numbers
of seller closely selling related, but not
homogeneous products. Each firm has a limited
share of the market.
Product differentiation : Each firm is in the
position to exercise some degree of monopoly
through product differentiation.
The product of the firm is close, but not perfect
substitute of other firm.
Explore more….
1. The differentiate products, firms sells their
products with different brand names, like Lux,
Dove, Lifebuoy, etc.
2. The differentiation among different competing
products may based on either ‘real’ or
‘imaginary’.
3. Higher degree of products differentiation make
demand for the product and enables the firm to
charge higher prices.
 Freedom to entry and exit : Firms are free to
enter into or exist from the industry at any time
they wish.
 However, its not as easy and free as under
perfect competition.
Non- price competition: Competing with other
firms by offering free gifts, making favourable
credit terms, etc., without changing prices of the
prices of their own products.
 Price Decision: By producing a unique product
or establishing a particular reputation, each firm
has partial control over the price.
Price depends upon how strongly the buyers are
attached to his brand.
 Advantages
Buyers gets plenty of options due to
differentiated products as every products has
some additional feature which is not the case
with perfect competition.
Different companies are selling differentiated
products they tend to advertise about it through
various channels of communication which make
customers more aware about the various
products.
 Cont’d
 Monopolistic competition is to constantly forces
the companies to invest in research and
development so that the company can produce
better quality product at cheaper rates than their
competitor.
 Disadvantages
The biggest disadvantages of monopolistic products
chances are companies may charge more than their fair
price from the consumer for extra features in products.
The companies add irrelevant features and do not
concentrate on improving the basic product which turns
into results in consumers paying extra for added
features.
Companies spend too much money on advertising as
which in turn increase in expenses for the company and
passes this cost to consumer in the from of higher price
for the product.