What Is a Monopolistic Competition
What is Monopolistic Competition ?
Monopolistic competition is a type of imperfect competition such that competing producers produce similar yet not perfectly substitutable products . Monopolistic competition as a market structure was first identified in the 1930s by American economist Edward Chamberlin, and English economist Joan Robinson. In short run , a firm in monopolistically competitive market can behave like monopolies including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit. In practice, however, if consumer innovativeness is low and heuristics are preferred, monopolistic competition can fall into natural monopoly, even in the complete absence of government intervention. In the presence of coercive government, monopolistic competition will fall into government-granted monopoly. Unlike perfect competition, the firm maintains spare capacity. Models of monopolistic competition are often used to model industries. Examples of Monopolistic Competition industries include shoes (Nike and Adidas) , shirts (Padini and Burberry) and cars (Proton and Perodua) .
The Characteristics of Monopolistic Competition
* Ease of entry of new firms in the long run because there are no significant barriers to entry.
* Many sellers that do not take into account rivals’ reactions.
* One of the most Unique characteristic of monopolistic competition is product differentiation where the goods that are sold are not homogenous products. Entry in Monopolistic Competition
There are no significant barriers to entry Monopolistic Competition . New firms may easily start the production of close substitutes for existing products . Due to easy entry and exit of Monopolistic Competition , the economic profit tend to be eliminated in the
Monopolistic competition is a type of imperfect competition such that competing producers produce similar yet not perfectly substitutable products . Monopolistic competition as a market structure was first identified in the 1930s by American economist Edward Chamberlin, and English economist Joan Robinson. In short run , a firm in monopolistically competitive market can behave like monopolies including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit. In practice, however, if consumer innovativeness is low and heuristics are preferred, monopolistic competition can fall into natural monopoly, even in the complete absence of government intervention. In the presence of coercive government, monopolistic competition will fall into government-granted monopoly. Unlike perfect competition, the firm maintains spare capacity. Models of monopolistic competition are often used to model industries. Examples of Monopolistic Competition industries include shoes (Nike and Adidas) , shirts (Padini and Burberry) and cars (Proton and Perodua) .
The Characteristics of Monopolistic Competition
* Ease of entry of new firms in the long run because there are no significant barriers to entry.
* Many sellers that do not take into account rivals’ reactions.
* One of the most Unique characteristic of monopolistic competition is product differentiation where the goods that are sold are not homogenous products. Entry in Monopolistic Competition
There are no significant barriers to entry Monopolistic Competition . New firms may easily start the production of close substitutes for existing products . Due to easy entry and exit of Monopolistic Competition , the economic profit tend to be eliminated in the
References: http://www.google.com.my/imgres?q=monopolistic+competition+vs+perfect+competition&um=1&hl=en&rlz=1C2CHLW_enMY468MY468&biw=1366&bih=624&tbm=isch&tbnid=dadfzgwSIbkGwM:&imgrefurl=http://mrski-apecon-2008.wikispaces.com/Chapter%2B17-%2BMonopolistic%2BCompetition&docid=x003NbcwY9YlnM&imgurl=http://mrski-apecon-2008.wikispaces.com/file/view/image_thumb2.png/115032481/image_thumb2.png&w=495&h=372&ei=SnZUT8TdKtCxrAeMzPTQDQ&zoom=1&iact=hc&vpx=281&vpy=143&dur=12&hovh=195&hovw=259&tx=197&ty=108&sig=105736167448608882830&page=1&tbnh=119&tbnw=159&start=0&ndsp=21&ved=1t:429,r:1,s:0 http://en.wikipedia.org/wiki/Advertising http://www.leadsleap.com/blog/5-types-of-advertising-techniques-online/ http://www.s-cool.co.uk/a-level/economics/market-structure-2/revise-it/monopolistic-competition http://www.amillionlives.net/type-of-advertising-ways-of-effectively-promoting-businesses-and-services.html http://www.thefreedictionary.com/monopolistic http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=monopolistic+competition