Monopolistic Competition and
Oligopoly

Submitted by:
Surbhi Goel
R2
13609178
INTRODUCTION
Monopolistic competition is a market structure
in which there are many firms selling
differentiated. Monopoli...
PRODUCT DIFFERENTIATION
Product differentiation implies that the
products are different enough that one brand
is different...
Output, Price, and Profit of a
Monopolistic Competitor in shor run:
• A monopolistically competitive firm prices in the
sa...
A Monopolistically Competitive Firm:
Output, Price, and Profit of a
Monopolistic Competitor in long run:
• At long run equilibrium, ATC equals price and
econom...
LONG RUN:
OLIGOPOLY
•
•
•
•
•

Oligopoly –Competition amongst the few
Industry dominated by small number of large
firms
High barrier...
PRICE RIGIDITY MODEL ( Non
Collusive)
THE KINKED DEMAND CURVE THEORY
• This model recognizes that demand for a
firm’s prod...
Kinked Model
• Demand Curve is kinked. MR curve is
discontinuous. If MC curve passes through the
discontinuous portion of ...
THANK YOU
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Monopolistic competition and oligopoly

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Monopolistic competition and oligopoly

  1. 1. Monopolistic Competition and Oligopoly Submitted by: Surbhi Goel R2 13609178
  2. 2. INTRODUCTION Monopolistic competition is a market structure in which there are many firms selling differentiated. Monopolistic competition is a market structure in which: –There are a large number of firms –The products produced by the different firms are differentiated –Entry and exit occur easily
  3. 3. PRODUCT DIFFERENTIATION Product differentiation implies that the products are different enough that one brand is different from other brand • The firms compete more on product differentiation than on price. • firms produce close substitutes, not an identical product.
  4. 4. Output, Price, and Profit of a Monopolistic Competitor in shor run: • A monopolistically competitive firm prices in the same manner as a monopolist—where MC = MR. • But the monopolistic competitor is not only a monopolist but a competitor as well. • The demand curve faced by a monopolistically competitive firm is negatively sloped but it is much flatter than that of a monopolist because of close substitutability of the products.
  5. 5. A Monopolistically Competitive Firm:
  6. 6. Output, Price, and Profit of a Monopolistic Competitor in long run: • At long run equilibrium, ATC equals price and economic profits are zero. • This occurs at the point of tangency of the ATC and demand curve at the output chosen by the firm.
  7. 7. LONG RUN:
  8. 8. OLIGOPOLY • • • • • Oligopoly –Competition amongst the few Industry dominated by small number of large firms High barriers to entry Products could be highly differentiated – branding or homogenous Both Price and Non–price competition Firms are interdependent
  9. 9. PRICE RIGIDITY MODEL ( Non Collusive) THE KINKED DEMAND CURVE THEORY • This model recognizes that demand for a firm’s product is determined both by the market demand for a product as well as by rival firm’s behaviour
  10. 10. Kinked Model • Demand Curve is kinked. MR curve is discontinuous. If MC curve passes through the discontinuous portion of the MR curve then equilibrium is at kink. • Greater the difference between the two segments of the demand curve, higher will be the length of the discontinuous portion of the MR curve. • Even if MC curves go up or go down , the equilibrium remains stable at the kink. This model is also called sticky price model.
  11. 11. THANK YOU

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