Economics uses four basic models for the study of the market situation.These models - pure competition, pure monopoly, monopolistic competition and oligopoly.It should be noted that the first two situations are ideal, that is, when considered necessary to abstract from some of the circumstances inherent in the real market.Monopolistic competition reflects reality more real, so it is more appropriate to the study.On it we discuss in this article.
Monopolistic competition - a market situation in which the following conditions are true: There are many buyers and sellers, selling differentiated products (ie, offered products are similar, but have distinctive features), there are small barriers to entry, andand sellers do not have to act together.In contrast to the ideal model of perfect competition (which operates an infinitely large number of buyers and sellers, there is no market barriers and product completely homogeneous), a model of monopolistic competition is more realistic displays the situation that is emerging in most cases, especially if we are talking about a group of FMCG- Consumer.
Understanding this model is best comes when considering the example.Let's try to prove that in the market of household chemicals, there is monopolistic competition.Take detergents.
So, there are a large number of manufacturers of these products, both domestic and foreign.Brands, which are sold under the detergent, there is even more.In addition, each manufacturer is trying to give your product some characteristics (flavor, the presence of special additives, packs of different sizes, and so on) - there is differentiation.In order to enter the market of washing powder as a manufacturer, you must make the cost of purchasing equipment, hiring staff and getting permits, if the entrepreneur wants to act only as a commercial agent, he needs only to issue the necessary papers, hire staff and organize the placesale.
Thus, high barriers to entry is not present, because there is no need to obtain special licenses, permits and other papers, which would need to have, for example, for the production of weapons.In addition, due to the fact that the sellers in the market quite a lot, they have no chance in any way to unite and establish a joint pricing policy - due to this price becomes the most important tool of competitive games and gives you the opportunity at lower to entice consumers.If the market was oligopolistic, all sellers would enter into an agreement and set unreasonably high prices, which consumers would be forced to accept as simply would have no alternative.
Monopolistic competition is a more efficient market model for customers, while an oligopoly is more favorable to sellers, although it has its own characteristics in terms of pricing - if the sellers are not in collusion, they will have to carefully monitor the actions of each other and reactchanges in pricing policies of competitors.In economic terminology, a chain of reactions called the game, consisting of separate moves.
Among all models of monopolistic competition is most common in the consumer market of both our country and others.We hope that this article has helped our readers to understand the peculiarities of the structure and functioning of the market of monopolistic competition.
