Characteristics Of Monopolistic Competition
METHODOLOGY
Price determination in such a competitive market then becomes a very economical & important strategy to remain visible and survive during adverse conditions. There are various approaches to determine the price and output under monopolistic market. Two distinguished Features of monopolistic market are:
1) Product differentiation
2) Existence of many firms supplying to the market
Product differentiation
In contrary to perfect competition where there is only one homogeneous commodity, in monopolistic competition there is differentiation of products. In monopolistic competition, products are not homogenous nor are they only remote substitutes. These are the products produced by competing monopolists that have separate identity, brand, logos, patents, quality and such other product features. Product differentiation does not mean that goods are completely different. Rather it means that products are different in some ways, but not altogether so. These imaginary differences are created through advertising, marketing, packaging and the use of trademarks and brand names.
Existence of many firms
Under monopolistic competition, there is fairly large number of sellers, let say 25 to 70. Each individual firm has relatively small part of the total market so that each has a very limited control over the price of the product. And each firm determines its own price-output policy without considering the reactions of rival firms.
In monopolistic competition, in the long run,
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