Monopolistic Competiton

Brooke Hays

What makes up a Monopolistic Competition market structure:

  • It has many buyers and sellers

  • They typically sell similar or unique products (they use advertising to differentiate their products from the pack)

  • All are essentially competing for the same customers

  • There are almost no major barriers to entering and exiting this market

  • The firms are price makers. Meaning, they can raise and lower their prices as they please.

Advantages and Disadvantages

  • No significant barriers to get into the market

  • The differentiation creates diversity and choice

  • The firm gets to create the price

  • Disadvantages:

  • Creates waste such as unnecessary packaging (many companies create new and different packaging to catch the eye of the consumer)

  • Sellers have to continue to think of new ways to advertise ( For example, McDonalds has to continue to think of new and creative ways to convince people to buy their unhealthy food)

The Running Room

Why The Running room is considered part of Monopolistic Competition

Reasons

  • The Running Room attempts to separate themselves through advertising

  • They sponsor many well-known races to obtain customers

  • The CEO uses his back story to make his company seem different than other athletic companies

  • They charge a lot of money for running clothing that is very similar to other brands because they want to appear superior

Poll question

What is one advantage and one disadvantage to a Monopolistic Competition?
Monopolistic competition