Monopolistic Competition. Market Structure Product Differentiation Product Differentiation Few Many Number of Firm Differentiation Product Differentiation.

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Presentation transcript:

Monopolistic Competition

Market Structure Product Differentiation Product Differentiation Few Many Number of Firm Differentiation Product Differentiation Product Identical Product Identical Product Perfect Competition Perfect Competition Monopolistic Competition Monopolistic Competition Homogeneous Product Oligopoly Differentiated Product Oligopoly

Product Differentiation Product Differentiation One Dominant One Dominant Number of Firm Differentiation Product Differentiation Product Identical Product Identical Product Dominant Firm Dominant Firm No Applicable Theory No Applicable Theory Monopoly Market Structure

Profit Maximization Condition Ability to set price Market Power Number of firm Economic Profit in long run Firm Strategy depend on rival? Product MR = MC Price setter P > MC No Entry 1 1 >= 0 NO Monopoly Entry Condition Single Product

Profit Maximization Condition Ability to set price Market Power Number of firm Economic Profit in long run Firm Strategy depend on rival? Product P = MR = MC Price taker P = MC Free Entry Many 0 0 NO Competitive Entry Condition Undifferentiated

Profit Maximization Condition Ability to set price Market Power Number of firm Economic Profit in long run Firm Strategy depend on rival? Product MR = MC Price setter P > MC Free Entry Few or Many 0 0 YES Monopolistic Entry Condition May be differentiated

Profit Maximization Condition Ability to set price Market Power Number of firm Economic Profit in long run Firm Strategy depend on rival? Product MR = MC Price setter P > MC Limited Entry Few >= 0 YES Oligopoly Entry Condition May be differentiated

Monopolistic Competition There is free entry and exit : it is relatively easy for new firm to entry the market with their own brands and for existing firms to leave if their products become unprofitable. Firms Compete by selling differentiated products that are highly substitutable for one another but not perfect substitution.

เส้นอุปสงค์ในความนึกคิด และเส้นอุปสงค์ที่เป็นจริง D2D2 D1D1 Q P D Q P P1P1 0 Q1Q1 Q1*Q1* A B Proportional demand

Equilibrium in short run MR SR D SR Q P MC AC Q SR P SR C

MR SR D SR Q P MC AC Q SR P SR Equilibrium in long run

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