Defining Monopolistic Competition

Monopolistic competition is a market structure characterised by a large number of relatively small firms, similar but not identical products sold by all firms, relatively good but not perfect resources mobility and extensive knowledge prices and technology.

Also, the goods produced by firms operating in a monopolistic competitive markets are subject to product differentiation.  Product differentiation involves the attempt by a seller to offer a product that is seen by the consumer as different and presumably better than the others on the market. A recognizable logo, distinctive brand names and distinctive packaging are popular form of a product differentiation. Like Nike shoes, its unique symbol and its special image, for sure increase the demand for Nike products and enables the company to charge a higher price than the others.   Product differentiation is the primary reason that the firm operating in  monopolistic competitive market is able to create a little monopoly all to itself.

Monopolistic Competitive Companies

Size:	Small Company	Medium Company	Large Company
Features:	Ginger Beef Express Ltd	Lens Crafter	Safeway
Differentiated products	Traditional Northern  Chinese style – Ginger Beef	optical retailer to promise eyeglasses in about an hour	membership price offer to members, easy shopping on line, exceptional customers services
Control over price	Some	Good Control	Some control under pressure between competitors
Mass advertising	Some	a lot of advertising and promotion:  TV , flyers and combined with insurance coverage	extensive in all kind of media: TV, radio and flyers
Brand name goods	private brand name	a variety of brand name frames, lens and contact lens	a large variety of its own brand name goods – ‘SELECT’ and its organic products  - ‘O organics’