A Study on The Concept of Monopolistic Competition

Abstract

Monopolistic competition establishes a market structure where competition between competing firms occurs due to their common but differentiated product offerings. Generally, none of these businesses enjoys monopolies, and they operate independently of one another. Notably, monopolistic competitions have the following characteristics: many firms, firms produce similar but differentiated products and are not price takers, firms have complete freedom of market entry and exit, and firms compete on price, quality, and marketing. While businesses may profit economically in the short run, they may fall short of long-term financial objectives. Additionally, market freedom may result in long-term economic profit failure. Typically, short-term economic gains can influence the establishment of new entrants, resulting in low-priced products, increased production of these products, and thus increased competition.