REAL 1820 Lecture Notes - Lecture 13: Monopolistic Competition, Marginal Cost, Perfect Competition
30 Oct 2017
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Document Summary
Firms compete on product quality, price, and marketing. Firms are free to enter and exit the industry. The presence of a large number of firms has three implications for the firms in the industry. Small market share each firm only has a limited power to influence the price of its product. Ignore other firms must be sensitive to the average (cid:373)arket pri(cid:272)e, (cid:271)ut does(cid:374)"t (cid:374)eed to pay attention to any one individual competitor. Collusion is impossible too many firms, so coordination of collusion is difficult. When firms make a product that is slightly different from the products of competing firms. Product differentiation enables firms fro compete in three areas: Quality the physical attributes that make it different from the products of other firms. Price trade-off btwn quality and price; higher quality product are charged more than low quality products. Marketing marketing takes two main forms: advertising and packaging.
