MONOPOLISTIC COMPETITION

Monopolistic Competition

Monopolistic Competition

Introduction

The term "monopolistic competition" was coined by economist Edward Chamberlain (Harvard University), in the 30's. Overall, this type of imperfect competition or imperfectly competitive market rate (as many economists call it) seems to perfect competition in three ways: there are many buyers and sellers, ease to enter and exit and companies consider given the prices of others (Deneckere, Rothschild, 1992, 361-373). The difference is that under perfect competition are identical products, while in monopolistic competition are different. However, monopolistic competition (which is actually a type of market in which there is a great diversity of companies and products), has some additional special features that distinguish it from other types of competition or market.

There are various definitions of monopolistic competition provided by economists and researchers. According to Gregory Mankiw, monopolistic competition is a "market structure in which many companies sell similar but not identical.

Samuelson and Nordhaus, monopolistic competition defined as "market structure in which there are many sellers who offer goods that are close substitutes but not perfect. In this market, each firm can influence to some extent in the price of product.

For Kotler, Arsmtrong, Camera and Cruz, "a monopolistic market consists of many buyers and sellers to negotiate on a range of prices, not a single market price. This range of prices occurs because producers can differentiate their offerings to consumers. One can introduce variations in the quality, performance or style of product, or can be exchanged for additional services. Consumers perceive different products and therefore, will pay different prices for them (Deneckere, Rothschild, 1992, 361-373). The producers try to differentiate their bids for different market segments and that, in addition to price, use other tools such as advertising, branding and personal selling".

According to the American Marketing Association (AMA), monopolistic competition is: A market situation where many sellers, each with a relatively small market share and slightly differentiated products, compete for consumer patronage. And a market situation where many sellers compete, often emphasized in other variables of marketing rather than price".

In short, monopolistic competition describes a type of market in which there are 1) many vendors (companies) competing products offering similar but not identical, and 2) many buyers who perceive differences between products (in terms of quality , design, amenities and services) so they are willing to pay different prices for them. Consequently, each firm influences to some extent in the price of your product or exerts some control over it, and makes use of marketing tools (such as advertising, branding and personal selling) to differentiate their offerings (Deneckere, Rothschild, 1992, 361-373).

Discussion and Analysis

Monopolistic competition - the type of market structure, consisting of many small firms producing differentiated products, and is characterized by free entry and exit from the market (Dixit, Stiglitz, 1977, 297-308). The concept of "monopolistic competition" goes back to the eponymous book by American economist Edward Chamberlin (1899-1967). Monopolistic competition, on the one hand, similar to the situation of monopoly, because some have a monopoly to control the price of their goods, but on the ...