Features of Monopolistic Market with Examples - Agribusiness Education and Research International

Monopolistic Market

Features of Monopolistic Market with Examples. A monopolistic market is a theoretical concept in which the public may sell goods and services to only one business. This is the opposite of a fully open market with an infinite number of businesses working in it.

Features of Monopolistic Market

A wide number of purchasers and vendors
Free entry and departure from companies
Differentiation Of Commodity
Sale Cost
Lack of Knowledge Great
Fewer Versatility
More Market for Elastic

A large number of Buyers and Sellers

There are huge numbers of businesses, but not as high as they are in perfect competition.

That means that each company can to some degree regulate its price-output policy. It is presumed that every price-output policy of a company would not receive reactions from other companies, meaning that the independent price policy is adopted by each company.

The gains in revenue would be marginally distributed over all of its rivals if a business decreases its price so that the degree to which each of the rival companies loses will be very limited. These rival companies would therefore have no incentive to respond.

Free Entry and Exit of Firms

Like the perfect competition, businesses can join or leave freely under monopolistic competition as well. When the current businesses are making super-normal profits, the companies will join. The production will increase with the entry of new companies, which will decrease the price, and then the current companies would only be left with normal profits. Similarly, some of the marginal firms would leave if the current firms suffer losses. As a result of the price increase, the supply will decrease and only the usual profit will be left to the existing companies.

Product Differentiation

The differentiation of goods is another characteristic of monopolistic rivalry. Product distinction refers to a situation in which the product’s consumers separate the product from others. Basically, different companies’ goods are not inherently different; they are subtly different from others. While each company that produces differentiated goods has its own product monopoly, it still has to face competition. This distinction of products can be real or imaginary. Real differences are such as design, the material used, capacity, etc., while imaginary differences are by ads, branding, etc.

Selling Cost

Another characteristic of monopoly competition is that, through various forms of investment, each company seeks to promote its product. Advertising is the most significant component of the sale price that influences both the product’s demand and cost. The monopolist’s main aim is to gain maximum income, so he changes this form of spending accordingly.

Lack of Perfect Knowledge

There is no perfect understanding of the demand for buyers and sellers. There are countless items, each of which is a near replacement for the other. Buyers do not know about all these items, their characteristics, and their costs.

Therefore, so many consumers purchase a commodity from a few varieties that are sold near the home for sale. A consumer often knows about a specific product where it is available at low prices. But due to a lack of time, he is unable to go there, or he is too lethargic to go, or he is unable to find proper transport. Similarly, the seller does not grasp the exact needs of consumers and is, thus, unable to take advantage of the situation.