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Monopolistic competition in a detergent market

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The companies in the detergent market closely fit the mold of a monopolistic competitive firm. Research a company in this market and explain how it fits some of the characteristics of a monopolistic competitive firm.

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Solution Summary

Explanation of monopolistic competition and the analysis of monopolistic competitive structure in detergent industry is discussed in the solution.

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Monopolistic Competition is defined as an "imperfect" form of competition, where there many sellers but the products are differentiated and may not be perfect substitutes. The reasons for the differentiations could be brand perception, product attributes (fragrance, flavor, packaging etc).

A very apt manifestation of monopoly competitive markets is that of detergents, where the product serves the same purpose of washing clothes. However, the detergent market comprises of many players such as Unilever, P&G, Henkel, Sun Products, Church & Dwight, Dial Corporation, Amway etc. These products though can be substituted by a customer, do not form perfect substitutes due to brand loyalty, brand differentiation achieved by respective players in the market mainly through marketing.

The detergent brand 'TIDE' of P&G would be an example to illustrate the aspects of a monopolistic competition. Economics ...

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