We start this chapter by looking at monopolistically competitive industries, which like competitive industries have a large number of sellers and easy entry and exit, but which differ from competitive industries because the firms sell differentiated products. Since this is the key difference between competitive and monopolistically competitive industries, we first spend some time understanding what product differentiation is, how it comes about, and what its effects are. For example, tuna caught by different fishermen are generally indistinguishable; if they were mixed together, no fisherman would be able to identify the ones he or she caught. For example, there are many different brands of cat food, and cat owners have preferences about which they want to buy for their cats, so the cat food market exhibits product differentiation. Product differentiation occurs in the markets for many consumer products and also in the markets for producer goods or capital goods.
Post a Comment. Tuesday, November 08, Analysis of the competition: how to stand out? The toothpaste market is a mature but still growing market and the marketing strategies of the main competitors is all about improving product quality, adding new product features, new sorts and flanker products, entering new market segments, new distribution channels and so on, to strengthen the firms competitive position. Each firm produces a toothpaste which is differentiated i. Thus one firm might produce a red, white and blue toothpaste with a spearmint taste, another might produce a white toothpaste with a wintergreen taste. This assumption is similar to a monopoly which produces a unique or highly differentiated product.
Examples Of Perfect Competition In Oligopoly
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