Monopolistic Competition

Monopolistic competition is between perfect competition and pure monopoly in real world. The most distinguishing feature of monopolistic competition is that the products and services offered are not same as other firms but close enough to be as substitutes for each other. The value can be added to the product by offering warranties, courteous service and convenient location where the product is sold. Branding also differentiate products from their competitors. The close enough products are also differentiated by design, colour logo, material used. There are large a number of firms in the market and they can enter and exit freely. The firms have some control over the price by adding extra value by service associated with the product or attracting customers by lowering the price. Advertisement is another way of attracting customer without reducing the prices.

The following table shows most of the features present in the monopolistic competitive market.

Monopolistic Competitive Companies

Size:	Small Company	Medium Company	Large Company
Features:	(Local) Corner food store	Calgary Co-op	Costco
Differentiated products	Personal service, location	Location, service	Brand name, service, price
Control over price	some	Some	Some
Mass advertising	Local Flyers, Local radio Ads, Word of mouth, yellow pages	Local Flyers, Radio and TV ads, Company website, yellow pages	Mass advertisements nationally, Company web sites
Brand name goods	Very few	few	many
Interdependence	None	some	some
Freedom of exit and entry	yes	yes	yes