The document discusses different market structures:
1. Perfect competition has many small firms producing similar goods. Monopolistic competition and oligopoly have some imperfect elements.
2. Monopolistic competition features product differentiation, free entry and exit, and firms competing on attributes like price, quality, and marketing.
3. Oligopoly is characterized by a small number of firms where each firm's actions impact others. It involves interdependence but also a temptation for anti-competitive collusion.
This document discusses different market structures: monopoly, monopolistic competition, and oligopoly. It provides details on:
- Monopolistic competition is characterized by many firms producing differentiated products and competing on quality, price, and marketing. There is free entry and exit into the industry.
- Firms in monopolistic competition operate at excess capacity and charge a price above marginal cost in the long-run.
- Oligopoly is a market with a small number of firms where each firm's actions impact others. It can lead to interdependent behavior and the temptation for firms to collude.
Monopolistic competition and oligopoly are two market structures between perfect competition and monopoly. Monopolistic competition is characterized by many firms with differentiated products. Firms have some market power but no barriers to entry or exit. Oligopoly is characterized by a few dominant firms where the behavior of one firm depends on its competitors. Game theory is used to analyze strategic interactions among oligopolistic firms.
Monopolistic practices and the role of competition commissions in the Indian economy. There are many sellers of differentiated products, free entry and exit in the market, and each firm faces a downward sloping demand curve (Monopolistic Competition). The Competition Commission of India prohibits anti-competitive agreements and abuse of dominant positions to promote efficiency, productivity, choice and reduce costs. Advertising is used by firms in monopolistic competition to attract customers to differentiated products and establish brand names as a signal of quality.
Mba1014 oligopoly & monopolistic competition 250513Stephen Ong
This document discusses monopolistic competition and oligopoly. It defines monopolistic competition as having many small firms producing differentiated products. Oligopoly is dominated by a small number of large firms where there is mutual interdependence. Pricing under oligopoly is discussed, including the kinked demand curve model where firms will match price cuts but not increases. Game theory models like the prisoner's dilemma are also introduced.
This document discusses monopolistic competition as a market structure between perfect competition and monopoly. Key points include:
- Under monopolistic competition, many firms sell differentiated products and free entry leads to zero long-run economic profits.
- Each firm faces a downward-sloping demand curve and can set prices above marginal cost in the short-run. In the long-run, entry drives prices down to average total cost.
- Compared to perfect competition, monopolistic competition results in excess capacity and prices above marginal cost, reducing efficiency. However, policy solutions are difficult given firms earn zero profits.
- Product differentiation encourages advertising and branding, which have debated social costs and benefits in terms of competition and consumer information.
This document summarizes the key aspects of monopolistic competition. It was prepared by Dipak Mer and Swati Parmar for MK Bhavnagar University. The founding theorist of monopolistic competition was Edward Chamberlin, who described it in his 1933 book. Monopolistic competition involves many producers selling differentiated but substitutable products. Firms have some degree of market power but also face competition. In both the short and long run, firms will adjust output and prices to maximize profits or minimize losses. The model of monopolistic competition is compared to perfect competition, with outcomes including excess capacity and markups over marginal cost under monopolistic competition.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key characteristics of each including:
1) Monopolistic competition is characterized by many small sellers, differentiated products, and easy entry and exit. Firms compete through non-price factors like advertising and product quality.
2) Oligopoly is dominated by a few large firms producing either homogeneous or differentiated products. Entry is difficult due to barriers like economies of scale. Firms must consider competitors' potential reactions in their pricing decisions.
3) Game theory, such as the prisoner's dilemma, can model strategic interactions between oligopolistic competitors who are mutually interdependent. Firms must choose strategies without communicating directly with rivals.
This document discusses different market structures: monopoly, monopolistic competition, and oligopoly. It provides details on:
- Monopolistic competition is characterized by many firms producing differentiated products and competing on quality, price, and marketing. There is free entry and exit into the industry.
- Firms in monopolistic competition operate at excess capacity and charge a price above marginal cost in the long-run.
- Oligopoly is a market with a small number of firms where each firm's actions impact others. It can lead to interdependent behavior and the temptation for firms to collude.
Monopolistic competition and oligopoly are two market structures between perfect competition and monopoly. Monopolistic competition is characterized by many firms with differentiated products. Firms have some market power but no barriers to entry or exit. Oligopoly is characterized by a few dominant firms where the behavior of one firm depends on its competitors. Game theory is used to analyze strategic interactions among oligopolistic firms.
Monopolistic practices and the role of competition commissions in the Indian economy. There are many sellers of differentiated products, free entry and exit in the market, and each firm faces a downward sloping demand curve (Monopolistic Competition). The Competition Commission of India prohibits anti-competitive agreements and abuse of dominant positions to promote efficiency, productivity, choice and reduce costs. Advertising is used by firms in monopolistic competition to attract customers to differentiated products and establish brand names as a signal of quality.
Mba1014 oligopoly & monopolistic competition 250513Stephen Ong
This document discusses monopolistic competition and oligopoly. It defines monopolistic competition as having many small firms producing differentiated products. Oligopoly is dominated by a small number of large firms where there is mutual interdependence. Pricing under oligopoly is discussed, including the kinked demand curve model where firms will match price cuts but not increases. Game theory models like the prisoner's dilemma are also introduced.
This document discusses monopolistic competition as a market structure between perfect competition and monopoly. Key points include:
- Under monopolistic competition, many firms sell differentiated products and free entry leads to zero long-run economic profits.
- Each firm faces a downward-sloping demand curve and can set prices above marginal cost in the short-run. In the long-run, entry drives prices down to average total cost.
- Compared to perfect competition, monopolistic competition results in excess capacity and prices above marginal cost, reducing efficiency. However, policy solutions are difficult given firms earn zero profits.
- Product differentiation encourages advertising and branding, which have debated social costs and benefits in terms of competition and consumer information.
This document summarizes the key aspects of monopolistic competition. It was prepared by Dipak Mer and Swati Parmar for MK Bhavnagar University. The founding theorist of monopolistic competition was Edward Chamberlin, who described it in his 1933 book. Monopolistic competition involves many producers selling differentiated but substitutable products. Firms have some degree of market power but also face competition. In both the short and long run, firms will adjust output and prices to maximize profits or minimize losses. The model of monopolistic competition is compared to perfect competition, with outcomes including excess capacity and markups over marginal cost under monopolistic competition.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key characteristics of each including:
1) Monopolistic competition is characterized by many small sellers, differentiated products, and easy entry and exit. Firms compete through non-price factors like advertising and product quality.
2) Oligopoly is dominated by a few large firms producing either homogeneous or differentiated products. Entry is difficult due to barriers like economies of scale. Firms must consider competitors' potential reactions in their pricing decisions.
3) Game theory, such as the prisoner's dilemma, can model strategic interactions between oligopolistic competitors who are mutually interdependent. Firms must choose strategies without communicating directly with rivals.
This document provides an overview of monopolistic competition and oligopoly. It discusses key characteristics of each market structure type, including that monopolistic competition involves many small firms producing differentiated products, while oligopoly involves a small number of dominant firms. The document also examines factors like pricing determination, barriers to entry, and economic efficiency under these models. It provides examples of industries that typically demonstrate monopolistic competition or oligopoly characteristics.
Monopolistic competition is an imperfect market structure between pure monopoly and perfect competition. It is characterized by many firms producing differentiated products and free entry and exit. In the long run, firms will enter and exit the market until economic profits are zero, but monopolistically competitive firms still operate with excess capacity and charge prices above marginal costs. This results in deadweight loss but regulating product differentiation would be difficult. Advertising and brand names are used by firms to differentiate products but their effects on competition and consumer choice are debated.
IIIE SECTION A ECONOMICS NOTES Copy of monoploistic competitionBhaskar Nagarajan
Monopolistic competition is characterized by many firms producing differentiated products. Each firm faces a downward-sloping demand curve and competes through quality, price, and marketing. In the short run, firms set price where marginal revenue equals marginal cost. In the long run, free entry and exit causes firms to earn zero economic profit. Firms invest in product development and heavy advertising to differentiate their products and shift their demand curves, though this may result in excess capacity and prices above marginal cost.
Competition exists when individuals and firms strive to gain a greater market share by selling goods and services. There are several types of market structures that determine the level of competition, including monopoly, oligopoly, and perfect competition. Michael Porter developed a five forces model for analyzing industry competition and developing business strategy. The five competitive forces are the threat of new entrants, power of suppliers, power of buyers, availability of substitutes, and rivalry among existing competitors.
Monopolistic competition is characterized by many small firms that produce differentiated products. While firms compete on attributes like quality, price, and marketing, each firm has a small market share and cannot influence market prices alone. Firms incur short-run losses or profits and, in the long run, break even as new entrants are attracted to profitable industries and exit unprofitable ones. Firms compete through product differentiation, advertising, and other non-price factors while charging a markup over costs to maximize profits.
Monopolistic competition is characterized by:
- Many small firms producing similar but differentiated products, allowing some control over pricing. While firms have some pricing power, the market is highly elastic due to substitutes.
- Free entry and exit into the market. Firms use advertising and product development to differentiate themselves and try to earn economic profits, but in the long-run normal profits are achieved as new entrants drive down prices.
- The economic effects are less detrimental than monopoly but include some waste from excess capacity and non-price competition through advertising.
This document provides information about different types of market forms: monopoly, monopolistic competition, and oligopoly. It defines each type and provides examples. It also discusses the effects of each market form on consumers, including advantages and disadvantages. Case studies are presented on the Indian railways (monopoly), gym industry (monopolistic competition), and automobile industry in India (oligopoly). The document aims to educate about market forms and analyze real-world examples.
This document provides an overview of oligopoly market structures. It defines oligopoly as a market with a small number of dominant firms. It describes different oligopoly models including Cournot, Stackelberg, and Bertrand, explaining how firms make output and pricing decisions under each model. It also covers collusion, barriers to entry, and contestable markets as key conditions that influence oligopoly behavior and market power.
This document discusses the competitive business environment. It defines competition and competitors. A competitive environment is one where there are many sellers offering similar products or services. Elements that shape the competitive environment include regulations, direct and indirect competitors, differentiation, and technology. Michael Porter's five forces model analyzes competition through examining the threat of new entrants, threat of substitutes, bargaining power of customers and suppliers, and industry rivalry. Competitive strategies include cost leadership, differentiation, and focus. Challenges to competitiveness include operations, logistics costs, customer acceptance, and understanding international markets.
Firms face different costs in the short-run depending on their level of output. Total costs include total fixed costs, which do not vary with output, and total variable costs, which do vary with output. As a firm's output increases, average fixed costs decline due to spreading fixed costs over more units of output. Average variable costs and average total costs initially decline as well, but eventually begin increasing once diminishing returns set in. Marginal cost, the change in total costs from an additional unit of output, also increases once diminishing returns occur. Understanding how costs change with output level and productivity helps firms maximize profits.
The Economics of Market Power for KWM_FinalLuke Wainscoat
This document provides an introduction to analyzing market power. It discusses key concepts such as perfect competition, monopoly, barriers to entry, and different forms of competition among existing suppliers. Specifically, it compares quantity/capacity competition with price competition and examines how mergers may impact prices under each type. The document aims to outline the relevant economic theories and evidence used to assess market power.
This document discusses different market structures: perfect competition, monopoly, oligopoly, and monopolistic competition. It provides examples and characteristics of each structure. A monopoly is defined as a single supplier of a unique product or service with significant barriers to entry that allow it to control prices. Oligopolies have a few dominant firms producing similar products where they influence each other's pricing decisions. Monopolistic competition involves many sellers of differentiated products competing through advertising and branding.
This document discusses the concept of oligopoly, which is a market structure with a small number of producers. It describes key characteristics of oligopoly, including that firms recognize their interdependence and can influence market prices through their actions. The document also discusses game theory and how it can be used to analyze firm behavior in oligopolistic industries, using examples like the prisoner's dilemma. It notes that tacit collusion is possible if firms interact repeatedly through strategies like "tit for tat."
This chapter covers the types of market such as perfect competition, monopoly, oligopoly and monopolistic competition, in which business firms operate.
This document discusses different types of market structures:
- Perfect competition has many small competitors, identical products, easy entry and exit into the market, and competitors have little control over price.
- Monopolistic competition has many competitors but differentiated products, easy entry and exit, and competitors can control price to some degree.
- Oligopoly has a few large competitors offering similar or differentiated products, difficult entry and exit, and competitors have significant control over price.
- Monopoly has a single dominant competitor, barriers to entry, and full control over price.
The document analyzes Walmart's market structure and impact on suppliers and concludes it exhibits characteristics of both oligopolistic and monopolistic competition.
The document discusses market power and pricing strategies in various industries. It provides examples of market share concentrations in UK retail banking, with the top 5 banks holding 85% of the market. It also examines factors that give firms market power like entry barriers, economies of scale, and influence over regulators. The document then discusses concepts of economic efficiency including allocative, productive, and dynamic efficiency. It analyzes pricing strategies like price discrimination and how they can be used to segment markets. Finally, it considers factors that may explain falling smartphone prices such as intense competition, emerging markets, and satisficing consumer behavior.
The document summarizes different market structures: perfect competition, monopolistic competition, oligopoly, and monopoly. It provides details on the characteristics of each structure, citing academic sources. Perfect competition requires homogeneous products, price-taking firms with perfect knowledge, and perfectly mobile resources. Monopolistic competition involves differentiated products where each firm is a price-taker facing a downward sloping demand curve. Oligopoly features interdependent firms in a market with few players. Monopoly is defined as a single seller producing the entire market supply.
This document discusses different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It provides details on the key features of each structure, including how pricing is determined. For perfect competition, the market price is determined by supply and demand. A monopoly is characterized by a single seller. Monopolistic competition involves differentiated products and imperfect competition. Oligopoly is dominated by a small number of large sellers, with features like product branding and interdependent decision-making. Examples are provided for each market structure type.
The document provides an overview of market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It defines key concepts such as market equilibrium, revenue curves, and profit maximization conditions. For each market structure, it discusses features, pricing determination, and equilibrium in both the short-run and long-run. It also provides examples of Cournot and Bertrand models of oligopoly to illustrate how firms may consider competitors' actions when setting prices and output.
The document discusses different market structures:
- Perfect competition has many small firms, homogeneous goods, free entry and exit and perfect information.
- Monopolistic competition has many firms, product differentiation, free entry and exit.
- Oligopoly has a small number of firms, potential for product differentiation and barriers to entry.
- Monopoly has a single seller, barriers to entry and no substitutes for its product.
This document discusses various concepts related to oligopoly market structure including:
1) Oligopoly is characterized by few sellers that make interdependent decisions regarding price and output. Barriers to entry allow for potential economic profits in the long run.
2) Models of oligopoly include Cournot, Sweezy, and collusive models like cartels with price leadership.
3) Game theory can be used to analyze strategic interactions between oligopolists through concepts like the prisoner's dilemma, Nash equilibrium, and concentration measures.
The document discusses the history and development of the electricity market in the Philippines. It describes how Manila Electric Company (Meralco) was established in 1903 after being granted a franchise by the Philippine government to operate an electric street railway and provide electric power in Manila and surrounding areas. Meralco grew to dominate the electricity market, providing both transportation via streetcars and the primary electric power supply. Over time, Meralco's revenues shifted from transportation to focus mainly on electricity as its core business.
This document provides an overview of monopolistic competition and oligopoly. It discusses key characteristics of each market structure type, including that monopolistic competition involves many small firms producing differentiated products, while oligopoly involves a small number of dominant firms. The document also examines factors like pricing determination, barriers to entry, and economic efficiency under these models. It provides examples of industries that typically demonstrate monopolistic competition or oligopoly characteristics.
Monopolistic competition is an imperfect market structure between pure monopoly and perfect competition. It is characterized by many firms producing differentiated products and free entry and exit. In the long run, firms will enter and exit the market until economic profits are zero, but monopolistically competitive firms still operate with excess capacity and charge prices above marginal costs. This results in deadweight loss but regulating product differentiation would be difficult. Advertising and brand names are used by firms to differentiate products but their effects on competition and consumer choice are debated.
IIIE SECTION A ECONOMICS NOTES Copy of monoploistic competitionBhaskar Nagarajan
Monopolistic competition is characterized by many firms producing differentiated products. Each firm faces a downward-sloping demand curve and competes through quality, price, and marketing. In the short run, firms set price where marginal revenue equals marginal cost. In the long run, free entry and exit causes firms to earn zero economic profit. Firms invest in product development and heavy advertising to differentiate their products and shift their demand curves, though this may result in excess capacity and prices above marginal cost.
Competition exists when individuals and firms strive to gain a greater market share by selling goods and services. There are several types of market structures that determine the level of competition, including monopoly, oligopoly, and perfect competition. Michael Porter developed a five forces model for analyzing industry competition and developing business strategy. The five competitive forces are the threat of new entrants, power of suppliers, power of buyers, availability of substitutes, and rivalry among existing competitors.
Monopolistic competition is characterized by many small firms that produce differentiated products. While firms compete on attributes like quality, price, and marketing, each firm has a small market share and cannot influence market prices alone. Firms incur short-run losses or profits and, in the long run, break even as new entrants are attracted to profitable industries and exit unprofitable ones. Firms compete through product differentiation, advertising, and other non-price factors while charging a markup over costs to maximize profits.
Monopolistic competition is characterized by:
- Many small firms producing similar but differentiated products, allowing some control over pricing. While firms have some pricing power, the market is highly elastic due to substitutes.
- Free entry and exit into the market. Firms use advertising and product development to differentiate themselves and try to earn economic profits, but in the long-run normal profits are achieved as new entrants drive down prices.
- The economic effects are less detrimental than monopoly but include some waste from excess capacity and non-price competition through advertising.
This document provides information about different types of market forms: monopoly, monopolistic competition, and oligopoly. It defines each type and provides examples. It also discusses the effects of each market form on consumers, including advantages and disadvantages. Case studies are presented on the Indian railways (monopoly), gym industry (monopolistic competition), and automobile industry in India (oligopoly). The document aims to educate about market forms and analyze real-world examples.
This document provides an overview of oligopoly market structures. It defines oligopoly as a market with a small number of dominant firms. It describes different oligopoly models including Cournot, Stackelberg, and Bertrand, explaining how firms make output and pricing decisions under each model. It also covers collusion, barriers to entry, and contestable markets as key conditions that influence oligopoly behavior and market power.
This document discusses the competitive business environment. It defines competition and competitors. A competitive environment is one where there are many sellers offering similar products or services. Elements that shape the competitive environment include regulations, direct and indirect competitors, differentiation, and technology. Michael Porter's five forces model analyzes competition through examining the threat of new entrants, threat of substitutes, bargaining power of customers and suppliers, and industry rivalry. Competitive strategies include cost leadership, differentiation, and focus. Challenges to competitiveness include operations, logistics costs, customer acceptance, and understanding international markets.
Firms face different costs in the short-run depending on their level of output. Total costs include total fixed costs, which do not vary with output, and total variable costs, which do vary with output. As a firm's output increases, average fixed costs decline due to spreading fixed costs over more units of output. Average variable costs and average total costs initially decline as well, but eventually begin increasing once diminishing returns set in. Marginal cost, the change in total costs from an additional unit of output, also increases once diminishing returns occur. Understanding how costs change with output level and productivity helps firms maximize profits.
The Economics of Market Power for KWM_FinalLuke Wainscoat
This document provides an introduction to analyzing market power. It discusses key concepts such as perfect competition, monopoly, barriers to entry, and different forms of competition among existing suppliers. Specifically, it compares quantity/capacity competition with price competition and examines how mergers may impact prices under each type. The document aims to outline the relevant economic theories and evidence used to assess market power.
This document discusses different market structures: perfect competition, monopoly, oligopoly, and monopolistic competition. It provides examples and characteristics of each structure. A monopoly is defined as a single supplier of a unique product or service with significant barriers to entry that allow it to control prices. Oligopolies have a few dominant firms producing similar products where they influence each other's pricing decisions. Monopolistic competition involves many sellers of differentiated products competing through advertising and branding.
This document discusses the concept of oligopoly, which is a market structure with a small number of producers. It describes key characteristics of oligopoly, including that firms recognize their interdependence and can influence market prices through their actions. The document also discusses game theory and how it can be used to analyze firm behavior in oligopolistic industries, using examples like the prisoner's dilemma. It notes that tacit collusion is possible if firms interact repeatedly through strategies like "tit for tat."
This chapter covers the types of market such as perfect competition, monopoly, oligopoly and monopolistic competition, in which business firms operate.
This document discusses different types of market structures:
- Perfect competition has many small competitors, identical products, easy entry and exit into the market, and competitors have little control over price.
- Monopolistic competition has many competitors but differentiated products, easy entry and exit, and competitors can control price to some degree.
- Oligopoly has a few large competitors offering similar or differentiated products, difficult entry and exit, and competitors have significant control over price.
- Monopoly has a single dominant competitor, barriers to entry, and full control over price.
The document analyzes Walmart's market structure and impact on suppliers and concludes it exhibits characteristics of both oligopolistic and monopolistic competition.
The document discusses market power and pricing strategies in various industries. It provides examples of market share concentrations in UK retail banking, with the top 5 banks holding 85% of the market. It also examines factors that give firms market power like entry barriers, economies of scale, and influence over regulators. The document then discusses concepts of economic efficiency including allocative, productive, and dynamic efficiency. It analyzes pricing strategies like price discrimination and how they can be used to segment markets. Finally, it considers factors that may explain falling smartphone prices such as intense competition, emerging markets, and satisficing consumer behavior.
The document summarizes different market structures: perfect competition, monopolistic competition, oligopoly, and monopoly. It provides details on the characteristics of each structure, citing academic sources. Perfect competition requires homogeneous products, price-taking firms with perfect knowledge, and perfectly mobile resources. Monopolistic competition involves differentiated products where each firm is a price-taker facing a downward sloping demand curve. Oligopoly features interdependent firms in a market with few players. Monopoly is defined as a single seller producing the entire market supply.
This document discusses different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It provides details on the key features of each structure, including how pricing is determined. For perfect competition, the market price is determined by supply and demand. A monopoly is characterized by a single seller. Monopolistic competition involves differentiated products and imperfect competition. Oligopoly is dominated by a small number of large sellers, with features like product branding and interdependent decision-making. Examples are provided for each market structure type.
The document provides an overview of market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It defines key concepts such as market equilibrium, revenue curves, and profit maximization conditions. For each market structure, it discusses features, pricing determination, and equilibrium in both the short-run and long-run. It also provides examples of Cournot and Bertrand models of oligopoly to illustrate how firms may consider competitors' actions when setting prices and output.
The document discusses different market structures:
- Perfect competition has many small firms, homogeneous goods, free entry and exit and perfect information.
- Monopolistic competition has many firms, product differentiation, free entry and exit.
- Oligopoly has a small number of firms, potential for product differentiation and barriers to entry.
- Monopoly has a single seller, barriers to entry and no substitutes for its product.
This document discusses various concepts related to oligopoly market structure including:
1) Oligopoly is characterized by few sellers that make interdependent decisions regarding price and output. Barriers to entry allow for potential economic profits in the long run.
2) Models of oligopoly include Cournot, Sweezy, and collusive models like cartels with price leadership.
3) Game theory can be used to analyze strategic interactions between oligopolists through concepts like the prisoner's dilemma, Nash equilibrium, and concentration measures.
The document discusses the history and development of the electricity market in the Philippines. It describes how Manila Electric Company (Meralco) was established in 1903 after being granted a franchise by the Philippine government to operate an electric street railway and provide electric power in Manila and surrounding areas. Meralco grew to dominate the electricity market, providing both transportation via streetcars and the primary electric power supply. Over time, Meralco's revenues shifted from transportation to focus mainly on electricity as its core business.
Students are assigned to create a poster explaining one of four market structures: perfect competition, monopolistic competition, oligopoly, or monopoly. The poster must include the market characteristics/definition, four industry examples with pictures, a description of competition and pricing power, costs of starting a business, required labor skills, and benefits to consumers or producers. Additionally, students are tasked with identifying the market structure for various industries on their notesheet based on characteristics.
perfect competition, monopoly, monopolistic and oligopolysandypkapoor
Price determination under different market structure and characterstics of all these market stractures along with graphical presentation of Perfect competition, Monopoly, Monopolistic and Oligopoly market structue
IIIE SECTION A ECONOMICS NOTES Monoploistic competitionBhaskar Nagarajan
This document provides an overview of monopolistic competition. It defines monopolistic competition as a market with many firms producing differentiated products, free entry and exit, and firms competing on quality, price, and marketing. It explains that in the short run, firms set price where marginal revenue equals marginal cost. In the long run, entry continues until firms earn zero economic profit. It also discusses how firms use product development, innovation, and advertising to maintain an advantage over competitors in monopolistically competitive markets.
Monopolistic competition is characterized by many firms producing differentiated products and free entry and exit into the market. While each firm has some market power, in the long run competition drives profits down to zero. However, monopolistic competition is less efficient than perfect competition due to excess capacity and prices above marginal costs. Advertising and brand names are used by firms to differentiate products, but their economic impact is debated, with some arguing they reduce competition and others that they better inform consumers.
This document discusses monopolies and profit maximization under monopoly. It begins by asking several questions about why monopolies arise, how monopolies choose price and quantity, and what governments can do about monopolies. It then defines a monopoly and explains that monopolies arise due to barriers to entry in the market. A monopoly faces a downward-sloping demand curve and sets price and quantity by producing where marginal revenue equals marginal cost. This results in the monopoly price being above marginal cost and a deadweight loss to society.
Monopolistic competition is a market structure with many small businesses that produce differentiated products. Each business has some control over price due to product differentiation but faces competition from substitutable products. Key features include differentiated but substitutable products, many sellers and buyers, free entry and exit, and profit maximization through product differentiation and non-price competition like advertising. In long run equilibrium, firms earn only normal profits as entry by new firms eliminates excess profits. Output is lower and prices higher under monopolistic competition compared to perfect competition.
Monopolistic competition - The Four Types of Market Structure - EconomicsFaHaD .H. NooR
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms.[1][2] 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. Textbook examples of industries with market structures similar to monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in large cities. The "founding father" of the theory of monopolistic competition is Edward Hastings Chamberlin, who wrote a pioneering book on the subject, Theory of Monopolistic Competition (1933).[3] Joan Robinson published a book The Economics of Imperfect Competition with a comparable theme of distinguishing perfect from imperfect competition.
Monopolistically competitive markets have the following characteristics:
There are many producers and many consumers in the market, and no business has total control over the market price.
Consumers perceive that there are non-price differences among the competitors' products.
There are few barriers to entry and exit.[4]
Producers have a degree of control over price.
economics #ucp
What is 'Monopolistic Competition'
Characterizes an industry in which many firms offer products or services that are similar, but not perfect substitutes. Barriers to entry and exit in the industry are low, and the decisions of any one firm do not directly affect those of its competitors. All firms have the same, relatively low degree of market power; they are all price makers. In the long run, demand is highly elastic, meaning that it is sensitive to price changes. In the short run, economic profit is positive, but it approaches zero in the long run. Firms in monopolistic competition tend to advertise heavily.
BREAKING DOWN 'Monopolistic Competition'
Monopolistic competition is a middle ground between monopoly, on the one hand, and perfect competition (a purely theoretical state), on the other, and combines elements of each. It is a form of competition that characterizes a number of industries that are familiar to consumers in their day-to-day lives. Examples include restaurants, hair salons, clothing and consumer electronics. To illustrate the characteristics of monopolistic competition, we'll use the example of household cleaning products.
This document provides an overview of imperfect competition, specifically monopolistic competition and oligopolies/duopolies. It begins with definitions and key characteristics of these market structures. Monopolistic competition is described as having many firms that produce differentiated products and face elastic demand curves. Firms engage in non-price competition through advertising and branding. The document uses hotels as an example. Oligopolies and duopolies are described as having only a few firms, where each firm's decisions significantly impact competitors. Game theory is used to demonstrate mutual dependence between firms. The tendency for collusion but its illegality is also discussed.
- Monopolistic competition is a market structure with many small businesses that sell differentiated products. While the products are differentiated, they are still close substitutes for one another.
- Firms in monopolistic competition have some control over pricing through product differentiation, but still face competition. Each firm's pricing decisions do not significantly impact the overall market price.
- In the short run, firms maximize profits by producing at the point where marginal revenue equals marginal cost. In the long run, firms will exit if losing money and new firms will enter if others are earning profits, until all firms earn zero economic profit.
Monopolistic competition is an imperfect market structure with many firms, differentiated products, and free entry and exit. Each firm faces a downward-sloping demand curve and charges a price above marginal cost, resulting in excess capacity and markup over marginal cost. While product variety benefits consumers, monopolistic competition also results in deadweight loss and potentially an inefficient number of firms. Firms use advertising and brand names both to inform consumers and potentially manipulate them.
Monopolistic competition is a market structure with many small firms that produce differentiated products. While products are differentiated, firms still compete on factors like price, quality, and marketing. There are no barriers to entry or exit in monopolistic competition. In the short run, each monopolistically competitive firm will produce the quantity where marginal revenue equals marginal cost to maximize profits. Firms may earn profits or losses depending on whether price is above or below average total cost at the profit-maximizing quantity.
Monopolistic competition is characterized by many sellers offering differentiated products, free entry and exit into the market, and firms competing through non-price factors like advertising. In the short run, firms will earn economic profits or losses depending on demand. In the long run, free entry and exit will drive profits to zero as firms enter industries with profits and exit those with losses. While prices exceed marginal costs as in a monopoly, free entry ensures prices equal average costs in the long run as in perfect competition. However, monopolistic competition is not as efficient as perfect competition due to deadweight loss from prices above marginal costs.
Monopolistic competition describes a market structure with many small businesses that sell differentiated but similar products. While firms compete on price, they also engage in non-price competition through product differentiation, branding, and advertising. In the short run, firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, free entry and exit causes average costs to equal prices as firms earn zero economic profit.
Market structures vary based on the number and size of firms in an industry, the type of products produced, and the level of competition. There are four main types of market structures: perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is theoretical with many small firms, homogeneous products, and no barriers to entry or exit. Monopolistic competition has many firms producing differentiated products. Oligopoly has a small number of large firms, and monopoly has a single dominant firm producing unique products with no close substitutes.
1) Monopolistic competition is an imperfect market structure between perfect competition and monopoly. It is characterized by many small businesses that sell differentiated products that are close substitutes for one another.
2) Firms have some control over prices under monopolistic competition. While there are many buyers and sellers, product differentiation gives firms some monopoly power over their brand.
3) In both the short run and long run, a monopolistically competitive firm will be in equilibrium when marginal revenue equals marginal cost, allowing the firm to maximize its profits. In the short run, firms can earn supernormal profits if price is above average cost.
Monopolistic competition is a market structure with many small businesses that sell differentiated products with some level of price-setting power in the short run. In the long run, free entry and exit of businesses leads to normal profits. Key features include differentiated products, free entry and exit of businesses, and price-taking behavior in the long run. Examples include restaurants, hairdressers, and clothing brands. The model assumes businesses are productively and allocatively inefficient in the short run but can achieve dynamic and X-efficiency in the long run. New trade theory explains international trade patterns using the concept of monopolistic competition.
This document provides summaries of presentations on business economics topics by various students:
1. Priya Khandelwal presented on the characteristics of oligopoly markets and kink demand curves.
2. Priska Haria discussed short and long run equilibrium in monopolistic competition.
3. Mohit Joshi covered short and long run equilibrium in monopoly markets.
4. Divit Dholabhai presented on different market structures like perfect competition, monopoly, oligopoly, and monopolistic competition.
5. Ayush Chaudhary summarized the concept of break even point in economics.
The document summarizes key concepts about imperfect competition, including monopolistic competition and oligopoly. It discusses: 1) the characteristics of monopolistic competition as many small differentiated firms that engage in non-price competition, 2) how monopolistically competitive firms are price makers that follow marginal revenue = marginal cost, and 3) how in the long run they earn only normal profits. It then covers: 4) the characteristics of oligopoly including few firms, mutual interdependence, and high barriers to entry, 5) how oligopolists may use price leadership or form cartels to influence prices.
Employees are generally better off working in a monopolistic industry rather than a perfectly competitive industry for the following reasons:
- Job security tends to be higher in monopolistic industries since monopolists are less vulnerable to changes in demand. Perfectly competitive firms can exit the industry easily if demand falls.
- Wages may be higher in monopolistic industries since monopolists earn supernormal profits. They can afford to pay higher wages without reducing profits. Perfectly competitive firms operate at zero economic profit so have less flexibility to raise wages.
- Monopolists are less likely to lay off workers when demand falls temporarily since they want to maintain production levels. Perfectly competitive firms may lay off workers if demand falls since they produce at the market price
1. Imperfect competition
All the assumptions of perfect competition are not met
Increase in market power
Perfect Monopolistic Oligopoly Pure
competition competition monopoly
Many small Firms with Few but One firm
and similar brands powerful firms
firms 1
2. Monopoly and How It Arises
– A monopoly is a market:
That produces a good or service for which no close
substitute exists
In which there is one supplier that is protected from
competition by a barrier preventing the entry of new
firms.
2
3. What Is Monopolistic Competition?
– Monopolistic competition is a market structure in which
A large number of firms compete.
Each firm produces a differentiated product.
Firms compete on product quality, price, and marketing.
Firms are free to enter and exit the industry.
3
4. Monopolistic Competition
Large Number of Firms
–The presence of a large number of firms in the market implies:
Each firm has only a small market share and therefore has limited market
power to influence the price of its product
Each firm is sensitive to the average market price, but no firm pays attention
to the actions of others. So no one firm’s actions directly affect the actions of
others.
Collusion, or conspiring to fix prices, is impossible.
4
5. What Is Monopolistic Competition?
Product Differentiation
– A firm in monopolistic competition practices product
differentiation if the firm makes a product that is slightly different
from the products of competing firms.
5
6. What Is Monopolistic Competition?
Competing on Quality, Price, and Marketing
– Product differentiation enables firms to compete in three areas:
quality,
price,
and marketing.
Quality includes design, reliability, and service.
Because firms produce differentiated products, the demand for each
firm’s product is downward sloping.
But there is a tradeoff between price and quality.
Because products are differentiated, a firm must market its product.
Marketing takes the two main forms:
advertising and packaging. 6
7. Monopolistic Competition
Entry and Exit
– There are no barriers to entry in monopolistic competition, so firms cannot
make an economic profit in the long run.
Examples of Monopolistic Competition
– Producers of audio and video equipment, clothing, jewelry, computers, and
sporting goods operate in monopolistic competition.
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8. Price and Output in Monopolistic Competition
The Firm’s Short-Run Output and Price Decision
– A firm that has decided the quality of its product and its marketing
program produces the profit-maximizing quantity at which its
marginal revenue equals its marginal cost (MR = MC).
– Price is determined from the demand curve for the firm’s product
and is the highest price that the firm can charge for the profit-
maximizing quantity.
– Figure 12.1 shows a firm’s economic profit in the short run.
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9. Price and Output in Monopolistic Competition
– The firm in monopolistic
competition operates like
a single-price monopoly.
– The firm produces the quantity
at which MR equals MC and
sells that quantity for the
highest possible price.
– It earns an economic profit (as
in this example) when P > ATC.
9
10. Price and Output in Monopolistic Competition
Profit Maximizing or Loss Minimizing
– A firm might incur an economic loss
in the short run.
– Here is an example.
– At the profit-maximizing quantity,
If P < ATC and the firm incurs an
economic loss.
10
11. Price and Output in Monopolistic Competition
Monopolistic Competition and Perfect Competition
– Two key differences between monopolistic competition and perfect
competition are:
Excess capacity
Markup
– A firm has excess capacity if it produces less than the quantity at which
ATC is a minimum.
– A firm’s markup is the amount by which its price exceeds its marginal
cost.
11
12. Price and Output in Monopolistic Competition
– Firms in monopolistic
competition operate with
excess capacity in long-run
equilibrium.
– Firms produce less than the
efficient scale—the quantity
at which ATC is a minimum.
– The downward-sloping
demand curve for their
products drives this result.
12
13. Price and Output in Monopolistic Competition
Is Monopolistic Competition Efficient?
– Price equals marginal social benefit.
– The firm’s marginal cost equals marginal social cost.
– Price exceeds marginal cost, so marginal social benefit exceeds
marginal social cost.
–So the firm in monopolistic competition in the
long run produces less than the efficient
quantity.
13
14. Product Development and Marketing
Innovation and Product Development
– We’ve looked at a firm’s profit-maximizing output decision in the
short run and in the long run, for a given product and with given
marketing effort.
–To keep making an economic profit, a firm in
monopolistic competition must be in a state of
continuous product development.
– New product development allows a firm to gain a competitive
edge, if only temporarily, before competitors imitate the
innovation.
14
15. Product Development and Marketing
– Innovation is costly, but it increases total revenue.
– Firms pursue product development until the marginal revenue from
innovation equals the marginal cost of innovation.
–MR=MC innovation
15
16. Product Development and Marketing
Brand Names
– Why do firms spend millions of dollars to establish a brand name
or image?
– Again, the answer is to provide information about quality and
consistency.
– You’re more likely to overnight at a Holiday Inn than at Joe’s Motel
because Holiday Inn has incurred the cost of establishing a brand
name and you know what to expect if you stay there.
16
17. Product Development and Marketing
Efficiency of Advertising and Brand Names
– To the extent that advertising and selling costs provide consumers with
information and services that they value more highly than their cost, these
activities are efficient.
17
18. In some markets, there are only a few firms which compete.
For example, computer chips are made by Intel and Advanced Micro
Devices and each firm must pay close attention to what the other firm is
doing.
When a market has only a small number of firms, do they operate in the
social interest, like firms in perfect competition? Or do they restrict output
to increase profit, like a monopoly?
………………………….Room for the oligopoly
18
19. What Is Oligopoly?
– Oligopoly is a market structure in which
Natural or legal barriers prevent the entry of new
firms.
A small number of firms compete.
19
20. What Is Oligopoly?
– In part (b), there is a
natural oligopoly market
with three firms.
– A legal oligopoly might
arise even where the
demand and costs leave
room for a larger number
of firms.
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21. What Is Oligopoly?
Small Number of Firms
– Because an oligopoly market has a small number of firms, the firms are
interdependent and face a temptation to cooperate.
– Interdependence: With a small number of firms, each firm’s profit depends
on every firm’s actions.
– Cartel: A cartel and is an illegal group of firms acting together to limit
output, raise price, and increase profit.
– Firms in oligopoly face the temptation to form a cartel, but aside from
being illegal, cartels often break down.
– Think OPEC.
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Editor's Notes
Product differentiation—the heart of the space between monopoly and competition An old “ice cream on the beach” analogy really nails down the idea of product differentiation and explains how monopolistic competition fills the space between monopoly and perfect competition. Draw a line on the blackboard and label the two ends A and B . Tell the students that the line represents a beach (a long beach) along which beachgoers are uniformly spaced. An ice-cream vendor decides to set up shop on the beach—the only one. Where will she locate? The students will quickly see that the center—midway between A and B is the spot that will get the most customers because the cost of an ice cream is the market price plus the walking time to get it (remind them that the beach is very long!) Now a second ice-cream vendor opens up. Where does he locate? With a bit of help, the students will see that the best spot is right next to the first one. With one producer, there is monopoly and no variety—no product differentiation. With two producers, there is still no differentiation—technically, there is minimum differentiation . Now suppose a third and fourth ice-cream vendor come along. Where to they locate? At the ends of the beach at A and B . They differentiate as much as possible from each other and from the first two. Further entry has new ice-cream vendors locating in the middle of the gaps between the existing ones, always going into the widest gap. If the market could stand the competition, eventually, there would be ice-cream vendors so close to each other all along the beach that the members of any adjacent group were indistinguishable to a customer. Product differentiation would have been pushed to the point that there is no “space” for additional variety and the market would look like perfect competition. Real products are like the beach example Talk about sports shoes, breakfast cereals, and any other goods that interest you and for which there are good locally observable examples and encourage the students to see that they are like the beach example. The variety of products fill the available variety “space.”
The demand for a firm’s differentiated product in monopolistic competition Remind the students about the ceteris paribus condition that defines a demand curve. Along the demand curve for Nike tennis shoes, the prices of Adidas, Fila, Head, K Swiss, Prince, Reebok, and Wilson tennis shoes are constant. Some people prefer Nike to the other brands and will pay a bit more for Nike. Other people prefer some other brand and will buy Nike only if its price is low enough. Buyers have brand preferences, but they will switch brands if price differences are large enough. So the higher the price of a Nike shoe, the prices of the other brands remaining the same, the smaller is the quantity of Nike shoes demanded.
Understanding real world markets. Students have no difficulty seeing oligopoly in the world around them. Again, emphasize that the work they’ve just done understanding the models of perfect competition and monopoly are not wasted because the real-world situation of oligopoly can be better understood by building on some of the features of competition and monopoly. Again, some of what they learned in each of the two previous chapters survives and operates in oligopoly. Traditional oligopoly models. Many instructors today want to skip the traditional models of oligopoly. Others want to teach only these models and skip the game theory approach. Your choice! This chapter is written in self-contained sections so that you can skip either approach.