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Characteristics Of A Monopolistic market

Updated on September 11, 2011

Monopolistic competition refers to a two fold market structure where an element of monopoly exists as does perfect competition. it’s a practical type of market structure and in view of this we shall put into perspective some of the features or characteristics that could be seen in a monopolistic market structure.

  1. Number of sellers- there are many small sellers who are in competition with one another and at the same time sharing a profit margin and as a result of this profits will reduce to normal in the long run.
  2. Number of buyers- a feature of monopolistic competition is that there are many number of buyers who are in one way or another ignorant regarding market stracture and this leads to them being exploited in techniques like product different ion.
  3. Nature of the commodities traded- the goods sold in a monopolistic market are considered to be somehow identical in appearance and they all aim at solving the same problem. E.g there are different types of toothpaste. Therefore identical products in a market may most likely increase competition.
  4. Resource allocation- a low output of goods and services is witnessed in this market in fear of overproduction which may lead to losses. Therefore this market does not operate in fullest capacity.
  5. Pricing- the firms are the price makers which means each and every firm in the industry sets its own prices regardless of the pricing of other competing firms. The price is therefore set to average low due to the stiff competition that exists.
  6. Elasticity of demand- in a monopolistic market there exists a relative elastic demand because of the price wars that are common in the market. A small reduction in price will lead to a big increase in the quantity of goods demanded.
  7. Product differentiation- the preference and needs of the consumer are given a chance under a monopolistic market. The firms products are differentiated from those of the competitors in terms of changing the color, packaging e.t.c while in fact it is the same product.
  8. Government interference- a government interference must exist in this market to prevent firms exploiting consumers on such things as product differentiation.
  9. Advertisements- a lot of marketing and advertisements are common in monopolistic competition as firms try to outdo one another in attracting customers to their products. The aim here is for the firm to receive super profits in the short run.
  10. Selling costs- the selling costs under this market are high due to such things as advertising, giving warranty to consumers, after sale services e.t.c.
  11. Entry and exit- free entries and exits exists under this market. The firms which have been experiencing losses will go out of the market while at the same time the market welcoming some new entrants.


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    • Knownai profile imageAUTHOR

      Knownai 

      7 years ago from NAIROBI

      @raynold jay thank you for your positive comment. great work is coming.

    • Reynold Jay profile image

      Reynold Jay 

      7 years ago from Saginaw, Michigan

      A nice refresher course for me!

      You have this laid out beautifully and it is easy to understand. Keep up the great HUBS. I must give this an “Up ONE and awesome.” I'm always your fan! RJ

      Based upon your HUB, you might enjoy this HUB…

      https://hubpages.com/politics/Tiny-asks-a-Question...

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