Comparison of Model

Topics: Perfect competition, Economics, Barriers to entry Pages: 4 (1491 words) Published: January 20, 2013
Comparison of the models of perfect competition and monopolistic competition in terms of the structure- conduct- performance theory. Structure-conduct-performance theory is a theory which states that that market structure determines market conduct which in turn determines market performance. Thus each preceding step contributes to the next leading to an overall understanding of the way the market behaves under different schools of thought. Underneath is a comparison of perfect competition as well as monopolistic competition using the various elements of market structure, conduct and performance.

| Perfect Competition | Monopolistic competition|
Market concentration| The market is composed of a large number of players. No player has a majority stake in the market and each player is assumed to have more or less an equal share in the market and are dependent on each other. | The market is composed of a large number of players as in perfect competition but in monopolistic competition each has its own fixed stake in the market which is not affected by the other players in the market. | Product Differentiation| All products are identical in the market and all consumers have perfect knowledge as to the products and the players in the market. | All products in the market are markedly different from each other, thus each player has a small yet monopolistic share in the market for each product.| Entry Barriers | There are no barriers to entry at all in the short run or long run for perfect competition. Thus, there is open entry to new firms at all stages. | There is freedom for entry in monopolistic competition as well, for short and long run.| Vertical Integration | In perfect competition given that all products are identical, the concept of vertical integration falls flat as there can be no assembly or combination of these products further along in the supply chain. | In monopolistic competition there is a definite possibility...
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