Monopolistic competition is a market where many firms sell similar products but not identical ones. The products sold may have the same functions but could physically look different or just simply have different packaging. This makes the products sold as substitute products. Firms in monopolistic competition have some control of the price of products they sell. Almost all retail businesses are in monopolistic competition as well as services aimed at homeowners. There are 4 characteristics of a monopolistically competitive industry:
· There are many small firms
· There is freedom of entry
· Firms have some control over price
· Differentiated products
Below is a table that shows some features and examples of monopolistic competition.
Monopolistic Competitive Companies
Size:
|
Small Company
|
Medium Company
|
Large Company
|
Features:
|
Local Coffee Shop:
Insomnia Coffee
|
Canadian Chain:
Timothy’s
|
International Chain: Starbucks
|
Differentiated products
|
Packaging, Food
|
Packaging, Food, Accessories
|
Packaging, Food, Accessories, CDs
|
Control over price
|
Some
|
Some
|
Some
|
Mass advertising
|
Local Publications, Online
|
Print, Online
|
Television, Online, Print
|
Brand name goods
|
Few
|
Few
|
Few
|
Freedom of Entry
|
Yes
|
Yes
|
Yes
|
The table is well present the three sizes in the monopolistic competitive companies. I like the three coffee examples of in the coffee industries. They are similar – selling coffee but they are different in the sizes and maybe the market segment. Small coffee serves the community customers. Medium one serves the white or blue collar workers and people during their shopping in a mall. Large coffee shop serves even bigger market segments – internationally.
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