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Imperfect Competition Differentiated Substitutes

Monopolistic competition is an imperfect market structure where many firms produce differentiated products. Firms act as price setters and take rivals' prices as given without considering how their own prices impact rivals. Oligopoly is a market where a small number of firms dominate the industry. Because there are few players, each firm is aware of and influences the actions of other firms through strategic planning that accounts for competitive responses.

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Shweta Chaudhary
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49 views

Imperfect Competition Differentiated Substitutes

Monopolistic competition is an imperfect market structure where many firms produce differentiated products. Firms act as price setters and take rivals' prices as given without considering how their own prices impact rivals. Oligopoly is a market where a small number of firms dominate the industry. Because there are few players, each firm is aware of and influences the actions of other firms through strategic planning that accounts for competitive responses.

Uploaded by

Shweta Chaudhary
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from

one another as goods but not perfect substitutes (such as from branding, quality, or location). 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

In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge high prices.[3] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher costs for consumers. [1] Alternatively, oligopolies can see fierce competition because competitors can realize large gains and losses at each other's expense. In such oligopolies, outcomes for consumers can often be favorable. Because there are few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence and are influenced by the decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants.

Number of firms

Market power

Elasticity of demand

Product differenti ation

Excess profits

Efficie ncy

Profit maximiza tion condition

Pricing power

Perfect Competitio n

Infinite

None

Perfectly elastic

None

No

Yes[12]

P=MR=M C[13]

Price taker[13]

Monopolist ic Many competitio n

Low

Highly elastic (long run)[14]

High[15]

Yes/N o (Short /Long)


[16]

No[17]

MR=MC[1
3]

Price setter[13]

Monopoly

One

High

Relatively inelastic

Absolute (across industries)

Yes

No

MR=MC[1
3]

Price setter[13]

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