1. Monopolistic Competition and Oligopoly

2. Monopolistic competition Companies competing in open market selling items or services similar but not identical Blue jeans, bagel shops, ice cream, gas stations, retail stores Variations are minor

3. 4 Conditions Monopolistic Competition 1. Many firms- easy to enter into market 2. Few barriers- patents do not protect against competition 3. Slight control on price- can control price but have to watch consumers using substitute goods if $$$ too high 4. Differentiated goods- have some feature that sets products apart from one another

4. Nonprice competition 1. Physical characteristics- size, color, shape, texture, taste 2. Location- location, location, location Where do you want a Starbucks? 3. Service level- customer service and services available 4. Advertising, image, status-Nike, Perceptions vs realities designer names

5. Price, output, profits Prices-similar to perfect competition. Because of substitution effect, demand can be elastic Profit- firms earn enough to cover costs but must constantly compete and come up with innovations over long haul. Production- often lower that a perfectly competitive market- enough producers overall for consumers however

6. Oligopoly Few firms dominate a market Acting alone or as a team Air travel, cereal, household appliances Barriers to entry- licenses or patents through government High start up costs, expensive machinery