Monopolistic Competition

Monopolistic competition is a market structure characterized by many firms competing with slightly differentiated products. In this type of market, each firm has some degree of market power, allowing them to set prices above Marginal Cost. The key features include:

• Many sellers: Numerous firms operate in the market.
• Product differentiation: Products are similar but not identical, leading to brand loyalty.
• Free entry and exit: Firms can enter or exit the market without significant barriers.
• Some control over price: Firms can influence prices due to product differentiation.

Examples of monopolistic competition include:

• Restaurants: Many eateries offer varied menus and atmospheres, competing for customers.
• Clothing brands: Different brands sell apparel that appeals to various consumer tastes, despite bEINg similar in function.
• Hair salons: Various salons offer unique styles and services, catering to different preferences.

Cases of monopolistic competition can be observed in:

• The fast-food industry, where chains like McDonald’s and Burger King offer similar but differentiated menus.
• The cosmetics market, with brands like MAC and L’Oréal targeting diverse consumer segments with unique product lines.
• Online retail, where numerous shops sell comparable items with varying branding and customer service experiences.