Wednesday, December 2, 2015

the characteristic shared between monopolistic competition and oligopoly

Monopolistic competition, an imperfect form of competition in which many firms sell trivially distinguishable but unsubstitutable goods, and an oligopoly, where a small number of firms dominate a specific market, have several key similarities.


The first is that there are generally many consumers in the market. It is also possible, despite being somewhat counter-intuitive, that there may also be many producers under both systems. While an oligopoly is dominatedby a small number of producers,...

Monopolistic competition, an imperfect form of competition in which many firms sell trivially distinguishable but unsubstitutable goods, and an oligopoly, where a small number of firms dominate a specific market, have several key similarities.


The first is that there are generally many consumers in the market. It is also possible, despite being somewhat counter-intuitive, that there may also be many producers under both systems. While an oligopoly is dominated by a small number of producers, there are normally many smaller firms in existence that simple lack a controlling market share. The second is the capacity of the firms to control pricing. The firms of an oligopoly are inherently price setters, and the dominant firms of a monopolistic market generally take their competitors prices as a given, and ignore any impact their prices might have on the prices of competitors. This non-price competition places exclusive incentive of the maximization of profits. A final potential similarity is the production of heterogeneous competing products, although it is possible for such products in a oligopoly to be largely homogeneous.

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