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Product Differentiation
The concept of monopolistic competition purr forth by Chamberlin is a true revolutionary as well as more realistic than either perfect completion or pure monopoly. Before Chamberlin monopoly and competition were regarded two mutually exclusive alternatives one would be absent when the other exists. On the other hand according to Chamberlin in most of the real world economic situation both monopoly and competitive elements are present, Chamberlin concept of monopolistic competitions thus a blending of competition and monopoly.
The distinguishing feature of monopolistic commotion which makes it as a blending of competition and monopoly is the differentiation of the product. This means that his products of various firms are not homogeneous but differentiated though they are closely related to eac other. Product differentiation does not mean that the prods of various firms are altogether different. They are only slightly different so that they are quite similar and serve as close substituted of each other. When there is any degree of differtiation of products monopoly element enters the situation. And the greater the differentiation the greater the element of menology involved in the market situation when there is a large number of firms producing differentiated products each one has a monopoly of its own product but is subject to the competition of close substitute. Since each is a monopolist and ye this competitor we have a market situation which can be aptly described s monopolistic putative elements. Here it is worth quoting Chamberlin himself with differentiation appears no Napoli and as it proceeds further the element of monopoly becomes greater. Where there is any degree of differentiation whatever each seller has an absolute monopoly of his own product but is subject to the competition of more or less imperfect substitutes since each is a monopolist and yet has competitors we may speak of them as competing monopolists and what peculiar appropriateness, of the forces at work as those of monopolistic competition.
It is thus clear form above that in monopolistic competition products are not identical as in perfect competition, but neither is they remote substitutes as in monopoly. The products of various sellers are fails similar (but nith same) and serve as close substitutes of each other. Every seller has a monopoly of his own differentiated product but he has to face a stiff competition from his ravel sellers which are selling close substitutes of this products.
A general class of product it differentiated if a basis exists for preferring goods of one seller to those of other. Such a bias for preference may be real r fancied, it is slight buyers will be paired with sellers not in a random fashion (as in perfect competition) but according to their preference, there are broadly speaking two bases of product differentiation. Firstly differentiation may be based upon certain characteristic fo the product itself such as exclusive patented features, trademarks and trade names peculiarities of packages or wrappers if any or difference in quality design colour or style real qualitative differences like those of materials used design and workmanship are no doubt important means of differentiation products. But imaginary differences created through advertising the use of attractive packets the use of trademarks and brand names are more usual methods by which products are differentiated even if physically they are identical or almost so. Secondly differentiation may be based upon the conditions surrounding the sale of the product. This means that product not identical with those rendered by any other seller or firm. Thus in retail ride to take only one instance the conditions surrounding the sale of the product include the convenience of the seller location the general tone or character fo this establishment his way of doing business his reputation for fail dealing courtesy efficiency and all other which attach his customers either to himself or to those employed by him. If these and other intangible factors surrounding the sale of the product are different in case of differ sellers the product in each case will be different since the buyers take these intangible factors into consideration while making purchases. These factors like the patents trade market etc. serve as a basis for preference.
Lastly it may be noted that the sense in which the worked competition is generally used ninth busies world is in conformity more with the monopolistic competition than with the pure competition. The phrases such as price cutting under selling unfair competition meeting competition. Cutthroat competition securing markets etc. often used in the business world are irrelevant in the context of purr competition. This is because each seller under so- called pure competition accepts the going market price and can dispose of his entire supply f the product without affecting price. For a pure competitor there is no problem of choosing a price policy problem of advertising in red to attract customers. Thus the competition in the ordinary sense of the competitive phrases just noted above has meaning only in the context of monopolistic competition (and also of oligopoly) where products of various sellers are differentiated but closely related. Sellers really compete in the ordinary sense of the words only under the monopolistic competition and oligopoly.
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The distinguishing feature of monopolistic commotion which makes it as a blending of competition and monopoly is the differentiation of the product. This means that his products of various firms are not homogeneous but differentiated though they are closely related to eac other. Product differentiation does not mean that the prods of various firms are altogether different. They are only slightly different so that they are quite similar and serve as close substituted of each other. When there is any degree of differtiation of products monopoly element enters the situation. And the greater the differentiation the greater the element of menology involved in the market situation when there is a large number of firms producing differentiated products each one has a monopoly of its own product but is subject to the competition of close substitute. Since each is a monopolist and ye this competitor we have a market situation which can be aptly described s monopolistic putative elements. Here it is worth quoting Chamberlin himself with differentiation appears no Napoli and as it proceeds further the element of monopoly becomes greater. Where there is any degree of differentiation whatever each seller has an absolute monopoly of his own product but is subject to the competition of more or less imperfect substitutes since each is a monopolist and yet has competitors we may speak of them as competing monopolists and what peculiar appropriateness, of the forces at work as those of monopolistic competition.
It is thus clear form above that in monopolistic competition products are not identical as in perfect competition, but neither is they remote substitutes as in monopoly. The products of various sellers are fails similar (but nith same) and serve as close substitutes of each other. Every seller has a monopoly of his own differentiated product but he has to face a stiff competition from his ravel sellers which are selling close substitutes of this products.
A general class of product it differentiated if a basis exists for preferring goods of one seller to those of other. Such a bias for preference may be real r fancied, it is slight buyers will be paired with sellers not in a random fashion (as in perfect competition) but according to their preference, there are broadly speaking two bases of product differentiation. Firstly differentiation may be based upon certain characteristic fo the product itself such as exclusive patented features, trademarks and trade names peculiarities of packages or wrappers if any or difference in quality design colour or style real qualitative differences like those of materials used design and workmanship are no doubt important means of differentiation products. But imaginary differences created through advertising the use of attractive packets the use of trademarks and brand names are more usual methods by which products are differentiated even if physically they are identical or almost so. Secondly differentiation may be based upon the conditions surrounding the sale of the product. This means that product not identical with those rendered by any other seller or firm. Thus in retail ride to take only one instance the conditions surrounding the sale of the product include the convenience of the seller location the general tone or character fo this establishment his way of doing business his reputation for fail dealing courtesy efficiency and all other which attach his customers either to himself or to those employed by him. If these and other intangible factors surrounding the sale of the product are different in case of differ sellers the product in each case will be different since the buyers take these intangible factors into consideration while making purchases. These factors like the patents trade market etc. serve as a basis for preference.
Lastly it may be noted that the sense in which the worked competition is generally used ninth busies world is in conformity more with the monopolistic competition than with the pure competition. The phrases such as price cutting under selling unfair competition meeting competition. Cutthroat competition securing markets etc. often used in the business world are irrelevant in the context of purr competition. This is because each seller under so- called pure competition accepts the going market price and can dispose of his entire supply f the product without affecting price. For a pure competitor there is no problem of choosing a price policy problem of advertising in red to attract customers. Thus the competition in the ordinary sense of the competitive phrases just noted above has meaning only in the context of monopolistic competition (and also of oligopoly) where products of various sellers are differentiated but closely related. Sellers really compete in the ordinary sense of the words only under the monopolistic competition and oligopoly.
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