GMGT 1010 Lecture Notes - Lecture 14: Monopolistic Competition, Perfect Competition, Product Differentiation
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Perfect competition: the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product. Sellers produce products that appear to be identical. Monopolistic competition: the market situation in which a large number of sellers produce products that are very similar but that are perceived by buyers as different. Ex: hot dogs, candy, t-shirts, fast food industry. Ex: burger king has a monopoly in whoppers, but competition in fast food industry with a&w, mcdonald"s, wendy"s, etc. Has price advantage on whoppers, but not all foods. Product differentiation (the creation of real or perceived product differences) is key to success. Oligopoly: a form of competition in which just a few sellers dominate the market. Ex: oil and gas, tobacco, automobiles, aluminum, aircraft, cell phones. Initial investment required to enter the business is tremendous. Prices for products from different companies tend to be close to the same.