Pure Monopolistic Competition

In monopolistic competition there is large number of small firms; in which each firm has relatively small market share, and each firm is sensitive to the average market price of its product. In Monopolistic Competition there are lots of buyers and sellers and has perfect information (buyers and sellers are able to see prices at which others are buying/selling), no significant barriers to exit or entry- anyone can join or exit, differentiated products - The products are similar but not identical products sold by the firms. If you can differentiate your product, your market power increases. The more market power you have, the more you can influence price. On the other hand, pure competition is a market structure in which there are many competing …show more content…
Examples are public utilities and professional sports league. Characteristics of Pure Monopoly are: A single seller with a unique product (no close substitutes for that firm’s product). The firm is the price maker: the firm has considerable control over the price because it can control the quantity …show more content…
For example, one car manufacturer may install a CD player system in its cars while another company may not. This particular product feature would help the company compete by attracting more customers, because no other company would be offering that particular feature in its cars. An organization may adopt a product differentiation strategy as a way to compete in its particular market. Product differentiation creates a trade-off between consumer choice and productive efficiency. The stronger the product differentiation, the greater is the excess capacity and, therefore, the greater is the productive inefficiency. But the greater the product differentiation, the more likely it is that the firms will satisfy the great diversity of consumer