Exercise 7-1) Defining Monopolistic Competition

Defining Monopolistic Competition

* Definition for monopolistic competition

Monopolistic competition is hybrid between perfect competition and monopoly. There are large numbers of small firms that are relatively competitive with little market control on price. Similar but slightly different products exist and they can be substitutes for one another. Monopoly competitive firs are relatively free to enter and exit and buyer can get information of necessary alternatives but not all.

Monopolistic competitive companies

Where do you think the company Nike would fit in the table? Would it be considered a brand name company? What about the Dollar Store?

In my opinion, Nike is in the large company group. Even though Nike products are similar with other competitive products, the branding and advertising are making the brand name & company name Nike more famous. Sports marketing star marketing using TV commercials and sponsoring sports events are enough to appeal and improve brand value.

In the case of Dollar Store, it is similar with convenience store example in small company group. There are many dollar store but not combine together with franchise agreement so I think that it is like small business type. No brand power and no guarantee quality of product but just concentrating on cheapest price products.

Size:	Small Company	Medium Company	Large Company
Features:	Convenient store	Franchise restaurant	Walmart
Differentiated products	Almost similar products but slightly different price affects the differentiated products	Almost similar products but creates differences with branding, packaging etc	Almost similar products with branding, packaging and high qualified services.
Control over price	Price competition with other stores	Market competition and marketing cost make differ product cost	Government regulation, buying power
Mass advertising	Word of mouth marketing	Newspaper, outdoor advertising	TV commercial, Newspaper
Brand name goods	Few	A few	Many