1.  Imperfect competitors compete by changing prices but also in another way:  Non-price competition: the efforts to make a product distinct from that of competitors. Examples include:  Product Differentiation: making a product different from that of competitors  Advertising: provides consumer with information 6.4 Traits of Imperfect Competition

2.  Product differentiation leads to higher prices  Impact of advertising is also mixed – advertising lessens the market power of established businesses and leads to more industry flexibility Non-Price Competition Don’t worry, product differentiation is slightly more exciting than Diamond Shreddies !

3.  Most industries are either perfectly competitive or monopolistic  When you have an imperfectly competitive industry, it is difficult to establish whether it is monopolistically competitive or an oligopoly  Concentration Ratio:  The percentage of total sales revenue in a market earned by the largest businesses in the market Industrial Concentration

5.  Industrial Concentration: studies the effect of market power on the economy  looks at the domination of a market by one or a few large companies  Defense of Industrial Concentration:  Larger businesses can take advantage of economies of scale because they have lower per-unit costs Debate Over Industrial Concentration