Product differentiation in Oligopoly and monopolistically competitive firms Concept Introduction: Monopolistic Competition - An imperfect market competition where with a large number of sellers selling differentiated product is called the monopolistic competition. It exhibits the elements of both a monopoly and perfect competition . The defining characteristics of the market are- It has a large number of firms, relative free entry and exit of firms, product differentiation, imperfect information, transportation costs, inelastic demand and inefficient production. Oligopolistic Competition: A market structure dominated by a few firms selling homogenous or differentiated products. It is a highly concentrated market structure, where the competition takes the form of advertising, product differentiation etc instead of price war. The pricing and other strategies of the firms are highly interdependent. The existence of significant barriers to entry and exit of the firms into the market allows the market demand to be catered by a few producers. The market lacks uniformity with the existence of smaller firms too.

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Chapter 15, Problem bWYWL

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Product differentiation in Oligopoly and monopolistically competitive firms

Concept Introduction:

Monopolistic Competition - An imperfect market competition where with a large number of sellers selling differentiated product is called the monopolistic competition. It exhibits the elements of both a monopoly and perfect competition. The defining characteristics of the market are- It has a large number of firms, relative free entry and exit of firms, product differentiation, imperfect information, transportation costs, inelastic demand and inefficient production.

Oligopolistic Competition:

A market structure dominated by a few firms selling homogenous or differentiated products. It is a highly concentrated market structure, where the competition takes the form of advertising, product differentiation etc instead of price war. The pricing and other strategies of the firms are highly interdependent. The existence of significant barriers to entry and exit of the firms into the market allows the market demand to be catered by a few producers. The market lacks uniformity with the existence of smaller firms too.

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