Market Structure (The Video Series) - Monopolistic Competition

Hi Everyone,

Welcome to my third market structure video in the series. Today I am covering monopolistic competition. This video series is intended to supplement my written posts on market structures. Video offers another medium for me to bring my content to you. Everyone has their own preference to how they like to consume content.

Quick Summary of the main points in the video

Monopolistic competition is possibly my favourite market structure. It has many real world applications and examples. It is also reasonably well covered in mainstream economics but I am hoping I can still add a little to the topic with my own analysis.

Monopolistic competition has the following characteristics:

Many buyers
Many sellers
Differentiated products
There is both price competition as competition through product differentiation
Very minimal barriers to entry
Firms have some control over price but are generally considered as price takers/followers
Supernormal profits in the short-run and normal profits in the long-run
Allocative efficient price and quantity is generally not achieved
Profits provide incentive to improve quality as well reduce costs
Products are often promoted through advertising; though this type of advertising is generally informative advertising.

Monopolistic competition can also facilitate cooperation between firms to help reap economies of scale that normally only large firms can enjoy but without the loss of flexibility to respond to changes in the market.

Monopolistic competition encourages entrepreneurship which can help encourage innovation as well enable a higher standard of living and better quality of life.

I hope you enjoy the video.

All of my written market structure posts can be accessed using the following links.

Introduction to market structure written post can be accessed using the following link.