Exercise 7 - 1 Defining Monopolostic Competition

Defining Monopolistic Competition

Monopolistic Competition, one of the 4 basic market structures, has 4 major characteristics:

• There are many small firms;
• Each firm sells the same product, although products are slightly different;
• Firms are free to enter or exit the market without any significant barriers;
• Buyers have knowledge of alternative prices, product differences, brand names and techniques used in the industry.

Firms differentiate themselves from each other with their products and/or services:

• Physical differences of products can have multiple forms which may include materials, flavour or presentation;
• Perceived differences where identical products have only a small change which may be something small as different packaging;
• Support services for products and services differentiate firms by elements which may include increased level of service or self serve options.

Monopolistic Companies

Size:	Small Company	Medium Company	Large Company
Features:
Differentiated products	Opa! - Greek Fastfood	Earls - Evolving menu	Starbucks - Signature tasting espresso
Control over price	Booster Juice - offers a more advanced product and charges for it. i.e. They grow grass for drinks in-store.	Tim Hortons -  Guaranteed fresh coffee more affordable than Starbucks	Walmart - Economies of scale give retail giant enormous purchasing power
Mass advertising	Red Lobster- Television	Little Caesars - Television, Print and Public media	Mcdonalds - multimedia marketing
Brand name goods	Spolumbos - Brand used on menus and supermarket features, sponsorship	Izod -	Adidas

Source: http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=monopolistic%20competition