What is Monopolistic Competition?

Monopoly competition is one of the main market forms. The concept in economics is: an infinitely close market structure that approaches perfect competition. The obvious characteristics of monopolistic competition are: there are many producers and consumers in the market, and consumers have obvious preferences, and goods and services are non-homogeneous market entry and exit are completely free; each producer provides Many goods are different, but there is no essential difference. ^[1] is the most common form of existence in real life. ^[2]

Monopolistic Competition

The definition of monopolistic competition means that there are many manufacturers selling similar but not identical products in the market. The definition of a monopolistic competitive market: refers to a market organization in which there are many manufacturers that produce and sell the same kind of products with differences. Corporate monopoly competition refers to many

Monopoly competition is a common feature in the old economy.

The conditions of a monopolistic market are as follows:

First, there are a large number of companies in the production group that produce the same products with differences, and these products are very close to each other.

Measures to be taken against institutional monopoly competition

(I) Construction system

Positive influence of monopoly competition

1. Economies of scale. Since the scale of monopoly firms can be large, the benefits of economies of scale can be obtained. Its research and development capabilities may also enable

Monopolistic Competition

Monopoly firms have lower costs.

2. Although monopolistic manufacturers have no competitors in the product market, they will face competition in the capital market.

3. The long-term gain of excess profits can promote the further development of monopoly manufacturers or industries that produce new products.

Negative influence of monopoly competition

The monopoly market price is higher than the perfect competition in the equilibrium state. In the long-term equilibrium, the monopolist does not produce at the lowest possible cost compared to the manufacturers in the perfectly competitive market, and the output produced is also less than that which should be achieved in the perfectly competitive market. The excess profits obtained by monopoly firms are considered as inequality of income distribution.

In monopolistic competition, not only the product price is higher than the minimum average cost, and the output is lower than the output corresponding to the minimum average cost. In addition, in order to form product differences, manufacturers have additional expenses in improving product quality and advertising promotions, which increases product costs. Cause waste of resources.

However, some economists believe that the differences in products in monopolistic competition can meet the various needs of consumers and help improve consumer welfare. In non-price competition, manufacturers must continue to carry out technological innovation, improve product quality, and improve service methods, which is also conducive to enhancing consumer welfare. At this point, perfectly competitive markets are dwarfed. In a completely competitive market, although the price of products is low, similar products are all homogeneous and cannot meet the multi-level nature of consumer demand. Moreover, manufacturers lack motivation to innovate.

Institutional monopoly competition is an important cause of regional economic disparities

The negative effects of institutional monopoly competition are: first, the system's preferential supply of rights can better meet the needs of the system in areas where the system is monopolized, reduce the gap between the supply and demand of the system, and improve the overall efficiency of the system. , While other regions do not have such superior conditions.

Second, the system's right of prioritization allows the system monopoly regions to better grasp the potential opportunities of the expected system. Some potential profits, as long as they are ahead of them, will get as much potential profits as possible, thus being in a more favorable area in the regional economic competition, making the regional "Matthew Effect" even more serious.

Institutional monopoly competition exacerbates local protectionism

Institutional competition will introduce some innovative institutions, but also some institutions with local protectionist nature. Because the local government is an independent body of interest, and the limitations of various resources and markets determine that the local government will consciously or unconsciously use the autonomy provided by the system to arrange for the benefit of local interests to be maximized. The overall national interest system). Other places will follow up, which means that there is also competition in the introduction of protective institutional arrangements. This type of institutional competition will exacerbate local protectionism.

Institutional monopoly competition has led to increased inter-institutional conflicts

In order to seek local interests, institutional monopoly supply regions will introduce new systems that are beneficial to themselves within the scope allowed by the central government. Some regions will even break through the restrictions of the central government and introduce already favorable institutions, which makes local and central institutions happen. Conflict has undermined the authority of the central system.