Firms in this market structure have characteristics of both a monopoly and perfect competition
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**Inefficiency**
monopolistically competitive firms are not allocatively efficient. P is unequal to MC, as price tends to be greater than MC
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**Easy Entry and Exit**
new firms are able to enter and exit the very easily so when new firms arrive, the demand decreases for other existing firms.
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**Differentiated Products and Nonprice Competition**
non-price competition focuses on product promotion which set them apart from other rivals
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Excess Capacity
When the demand for a good or service is less than the amount of supply which the firm would provide to the market.
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Oligopoly
In this case, a number of firms within the same industry are dominating the market. Due to constant competition between firms, this leads to less increases in price
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Collusion
is the illegal alliance of two opposing firms in an attempt to disrupt market equilibrium.
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antitrust policy
This policy aims to prevent the creation of oligopolies from developing into monopolies as the lack of competition is not good for the economy and consumers.
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High entry barriers
Only a few firms are established in this market as if it were easier to enter, more firms would have made use of the economic profit earned
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Few Dominant Firms
only these firms sell differentiated or identical products.
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Price Leadership
a price leader in the market is able to set prices in order to increase profits
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Collusion
this occurs when rivals team up together to maximise their profits.
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Game theory
in mathematics and real life is the analysis of the method or strategy which people use to strategically win a game
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An equilibrium in game theory and oligopoly
when both firms reach a mutual understanding of using the dominant strategy.
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Dominant Strategy
the best choice for one player regardless of what the other player chooses
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When Price is greater than Marginal Cost and ATC
Occurs in the relationships of both monopolistic competition and oligopoly
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When marginal revenue and marginal cost are equal to each other
Is a profit maximisation method for both Monopolistic competition and oligopoly
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