Bcom 1st Year Meaning of Monopolistic Competition
Meaning of monopolistic competition
“Monopolistic competition” is a middle type of imperfect competition. The proponent of this idea was Prof. Chamberlin. Monopoly competition refers to a stage in which the number of sellers is high, but their items are not uniform, there is little difference or difference in the items. Due to ‘commodity discrimination’ each seller has absolute monopoly over his own commodity and can affect the price of the commodity. But since these firms sell similar items, there is also intense competition among these monopolistic vendors, so Prof. Chamberlin has called this situation a “monopolistic competition”. In the words of Stonier and Hague, “In the event of imperfect competition, most producers’ goods are very similar to those of their competitors, As a result, these producers always have to pay attention to how the actions of competitors will affect their profit. In economic theory, this kind of situation is analyzed under monopolistic competition or group equilibrium. In this, competition in many firms making the same items is complete and intense. ”
In short, “Where there are many firms in the market but there is differentiation in the product, monopolistic competition is the market condition.”
Features of monopolistic competition
(Characteristic Features of Monopolistic Competition)
The features of monopolistic competition are as follows
1. Greater number of firms operating independently
(Large Number of Independent Firms)-
(i) In monopolistic competition the number of vendors is more (less than the full competition), but each vendor is small and produces a very small proportion of the total production.
(ii) There is competition between these different vendors. They work independently, they do not have compromises or secret treaties.
2. Product Differentiation –
Object discrimination is the basic basis of monopolistic competition. Object discrimination means that not all units of a particular object are the same. Goods produced by all firms are mostly interchangeable, but they are not identical. Object discrimination can be of two types
(i) Real commodity differentiation- Under this there are real relation of variety in different units of commodity.
(ii) Artificial or fictitious differentiation – There is no difference between the different units of the object, but the advertisement affects the attitude of the customers in such a way that they start to understand the difference.
There are two methods of object discrimination –
(a) Object variation-
(A) This distinction may be based on the variation of the object; Such as variation in trademark, variation in packing, variation in color.
(B) Post-purchase services in commodity variety; For example, the facility of repair of goods, lac facility, return of goods in case of spoilage, facility of transporting the item to the buyer’s house, etc. are included.
3. Free entry of firms Sales extension-
The sales activities of the goods – advertising and sales characteristic * can generate confidence in the fact that their goods are difficult to enter into other vendors industry as a new form of freedom.
” F ree Entry of Firms” – Monopolies can enter the competition in the form of a season, but the competition is more difficult than in the full competition. The reason for this is – object discrimination. As firms enter the monopolistic competition independently, like monopolistic competition too, firms generally only get an advantage.
4. Non-price competition –
Since there is a difference in multiple competition, there is intense non-price competition in firms. This means that competition in monopolistic competition is not only on the price but on the quality of the goods, conditions related to the sale of the goods or services and science, etc. Is based.
In monopolistic competition, each type of partial monopoly is available to each firm or vendor and in such a situation it must compete with a whole group of monopolies like itself. Since no two firms in the monopolistic competition produce identical objects, economists use the term group in place of industry under monopoly competition.
In short, the characteristics of monopolistic competition are as follows –
(1) The number of firms is generally high.
(2) Any firm has the freedom to enter the industry.
(3) All firms resemble, but sell asymptomatic items.
(4) Object discrimination is found.
(5) Each firm has a monopoly on the production of its goods.
(6) The buyer may like an item more than the goods produced by different vendors.
(7) Competition is found in similar goods produced by different firms.
(8) The seller may charge a higher price than the goods of his competition based on the buyers preference.
(9) Non-price competition occurs.
