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Overview Of Aic's Monopolistic Competitive Market

771 Words4 Pages

According to Nellis & Parker (2006), monopolistic competitive markets exist where there are many organisations selling products or services that are comparable, but have slight degrees of differentiation from each other.
Nellis et al, further elaborate on the pricing discretion, stating that it is limited and consumers within this market can switch to alternative suppliers according to their needs and desires. (Nellis & Parker. 2006)

Nellis & Parker (2006) described the conditions and circumstances that lead to a monopolistic competitive market, these include:

1. A large number of organisations competing:
AIC competes against a collective of 93 licensed insurance companies trading.

2. Product differentiations:
AIC’s Insurance products have relatively close substitutes from competitors. Differentiation in the sector usually takes the form of advertisements and added services or benefits.

3. Freedom of entry and exit:
The only significant barrier to entry is the trading license provided for by the financial services board, this is relatively easy to obtain, provided the applicants meet statutory reserve capital requirements.

4. Non-price competition:
Further, pricing from one organisation to the next is relatively similar. The majority of established Insurers compete on Brand, service delivery and reputation.
The views of Nellis and Parker on monopolistic competition can be corroborated to Porters 5 forces. According to Porter (1980), a competitive environment

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