StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Monopolistic Competition. Concept, Advantages and Limitations - Essay Example

Cite this document
Summary
This paper explores distinctive characteristics of the monopolistic competition, its advantages and disadvantages, as compared with other types of market. Monopolistic competition is a market with several firms producing the same commodity or service but having no exact substitute of their produce…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.8% of users find it useful
Monopolistic Competition. Concept, Advantages and Limitations
Read Text Preview

Extract of sample "Monopolistic Competition. Concept, Advantages and Limitations"

Download file to see previous pages

These factors could be the brand name, brand personality, quality etc. Examples of firms competing in the monopolistic market are clothing brands, restaurants, and other service industries. This kind of competition is termed as monopolistic because each firm has its unique position in the market despite the presence of several other competitors. They usually have a loyal customer base that comprises of people who are not frequent switchers. Switching is generallyassociated with some sort of dissonance occurring in the whole buying experience and customers are generally indifferent to small price fluctuations.

As far as the market is concerned, it has certain key characteristics including: presence of many firms selling the same commodity with a slightvariance also known as a Unique Selling Proposition (USP) that makes them stand out amongst the market clutter. Product may have substitutes but the exact identical cannot be present due to its unique differentiating factors that are not based on prices. Customers have lesser control over prices as compared to the producers. Prices are also unlikely to be influenced by the competition.

Market leadership can be attained but by a small margin and on the basis of captured market share. There are no serious barriers to entry as compared to other market competition types. Production is usually lesser than the capacity and is based on carefully calculated demand. There are several problems associated with monopolistic competition that have been identified by several economists. Firstly, this form of competition will lead to no economic profits in the long run. This is because here are likely to be more market runners after some years and they will offer better incentives or differentiating factors if the current.

This paper offers a comprehensive theoretic analysis of the monopolistic competition, as a type of economic market. The limitations of that type of market, as well as its advantages and disadvantages to producers, customers and the economy as a whole are considered. Monopolistic competition refers to several different market players with unique differentiating factors The firms operating in monopolistic competition are also inefficient as they do not produce at the optimum level. Inefficiency, in economic terms, means that the available resources are not use at the optimal bringing down the chances of incurring lower cost with every marginal product.

This form of competition will lead to no economic profits in the long run. This is because here are likely to be more market runners after some years and they will offer better incentives or differentiating factors if the current firms do not invest heavily in product research and revamping. This, too, will be an addition to the costs and in the long run, the convenient and inevitable influx of new competition will result in minimal or no economic profits. In order to minimize future losses and build customer loyalty , focus should be on the quality management and customer service as advertising and marketing campaigns, packaging and ambiance stay for some time until a prospective market leader enters the picture and replicates it.

Negative aspect of monopolistic competition is that firms engage in misleading advertising and focus less on quality control after sometime.

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Monopolistic Competition. Concept, Advantages and Limitations Essay”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1497189-monopolistic-competition-concept-advantages-and-limitations
(Monopolistic Competition. Concept, Advantages and Limitations Essay)
https://studentshare.org/macro-microeconomics/1497189-monopolistic-competition-concept-advantages-and-limitations.
“Monopolistic Competition. Concept, Advantages and Limitations Essay”, n.d. https://studentshare.org/macro-microeconomics/1497189-monopolistic-competition-concept-advantages-and-limitations.
  • Cited: 0 times

CHECK THESE SAMPLES OF Monopolistic Competition. Concept, Advantages and Limitations

Marketing Heritage and Digital Innovation an Apparent Contradiction

References…………………………………………………………12 Abstract Marketing heritage is an emerging concept in the marketing field which is based on the historical status of the older companies and it is explicitly linked to the brand identity and the consumer appeal.... In the paper below, we will discuss how product differentiation takes place by selling a concept of luxury brand through its historical and cultural heritage, using the innovative tools of marketing....
11 Pages (2750 words) Essay

TeliaSon Era and Google (Competition Law)

This paper explores the concept of dominance and underscores how dominant firms abuse this position.... This is done in light of the TeliaSonera case study and with special reference to the concept of margin squeeze.... It begins by exploring the concept of dominance in abuse and how margin squeeze is affected.... Perhaps one that has been more effective in addressing the preceding concern is competition policy.... competition policy constitutes a set of measures adopted by the government which direct the behavior of the businesses as well as the structure of the entire business industry....
39 Pages (9750 words) Dissertation

Establishing a Continuing Business Model Innovation Process

Short term and long term small and big companies strategies must be based on the current economy movements and expected future trends with strategy being easily adoptable to any possible external or internal to economy shocks.... As the Federal Reserve chairman stated, the economy in the nearest year will suffer from the largely increased crude oil prices and gas prices, the negative affect of which is aggravated by the hurricanes which made consuming oil from some plants impossible with overall world demand for these energy resources being a way ahead of the supply....
10 Pages (2500 words) Essay

Different type of market in oil & gas industry

Market trend in the global oil and gas industry has been undergoing a major development and has gained major attention towards meeting rising demands of consumers.... In relation to the recent phenomenon, the emerging trend of this particular industry is by different market factors… Nevertheless, mind-numbing transition in the price has also been recognised as a long-standing concern that makes continuous swing of the global oil and natural gas industry (Balat & The oil price dynamics in the global market are more likely to influence by a number of key factors ranging from balance amongst supply and demand; geopolitical and macroeconomic conditions; to the transitions in exchange rates of the dominant economies across the world....
24 Pages (6000 words) Essay

The Complexity Behind the Implementation of a Single Market Policy in the EU

A patent provides temporary protection that lasts for 20 years (from the filing date) over something created by an inventor against businesses or individuals who would copy, imitate, or reproduce the invention of other people and trademarks grant businesses with an exclusive right to over a company's product name, words, signs and symbols, logos, the labelling and packaging as well as the exact product configuration or the appearance of the product itself3; IPRs are said to promote a monopolistic competition within the domestic and international markets....
19 Pages (4750 words) Case Study

Access to Finance for Small Businesses

hellip; Conducting the study was faced with a number of limitations.... When a small business finds itself competing in the same market as a large business, it is important to ensure a relatively equal level of access to finance for all the businesses before the market competition can take place in a very fair and open-ended manner....
9 Pages (2250 words) Research Proposal

Competition as a Part of Contemporary Business Environment

This paper examines the concept of co-opetition, which refers to simultaneous cooperation and competition between firms.... The concept will be looked at in general as a business strategy in competing firms.... Subsequently, the concept will be considered from the perspective of the nature of competition in the port industry In the process of deciding how to carry out a business, the current increasingly complex business environment makes it logical not to limit a firms analysis to the competitive environment....
12 Pages (3000 words) Coursework

Trade between Countries

From this work, it is clear about various types of trade theories such as monopolistic competition, Heckersher-Ohlin, and comparative advantage.... This work called "Trade between Countries" describes various reasons and theories behind trade between countries around the world....
9 Pages (2250 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us