+1 862 207 3288 Monopolistic competition is a mixture of monopoly and perfect competition and thus has mixed features. The features of monopolistic competition are as follows:
Large Number of Buyers as well as Sellers: As in perfect competition, there are large number of buyers and sellers in monopolistic competition. The size of each seller is very small and thus only a limited share is provided to every market.
Product Differentiation: This feature implies presence of imperfect substitutes instead of perfect substitutes. This is one distinct feature of this form of market since there are perfect substitutes in perfect competition and no close substitutes in monopoly.
Example: Colgate toothpaste and pepsodent toothpaste are very close substitutes of each other. They are essentially the same but are not perfect substitutes for most of the buyers.
Selling Costs: Product differentiation has its own implications for the market. It needs to be supported by heavy advertisements and selling costs. Thus there is presence of selling costs. These selling costs help build brand loyalty for customers. This brand loyalty empowers the producers to have a partial control over price and differentiate the form of market from perfect competition.
