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A monopolistically competitive market

Many economists argue that more research, development and innovation occur in the oligopolistic market structure than in any other. Why?

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Different market structures provide different incentives for the players, and involve different entry and exit conditions. They also offer different levels of price control, and opportunities of profit: both accounting and economic. It is important to look at the statement in this light. In a very compact manner we can say that a competitive market, and a monopolistic market, are the two extremes that we see.

A competitive market has very low (almost zero) cost of entry and exit, offers no control over price, offers no economic profit, and no product differentiation. This group usually consists of generic products like grains, milk, eggs etc.

A monopolistically competitive market offers some economic profits in the short-run, but for all practical purposes it behaves in about the same way as a perfectly competitive market, and shares the same features of little to no control over ...

Solution Summary

A monopolistically competitive market is overviewed.

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