• Monopolistic Competition

    In Monopolistic Competition, large number of suppliers will be there and they will compete with each other to sell their products.

    The basis characteristics are

    • There will be a large number of suppliers.
    • All the suppliers will follow an average price to sell their products. They can never increase the price abruptly in fear of losing the market share.
    • Each supplier produces the same type of product with very little difference. May be the difference lies only in the mind of the customer because of advertising or brand awareness program. One product can be easily substituted by other product.
    • Each supplier fights with each other on price, quality and quantity. Price can be set based on the quality but the difference should not be high.
    • Suppliers put more focus on marketing to create separate brand awareness for their own products. They use marketing and advertising significantly to create a difference in the consumer’s mind.
    • There will be low barriers to entry and exit in that particular product segment. Firms can enter into the segment easily if they find significant business benefit.

    FMCG market is a perfect example of monopolistic competition.

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