There are many companies competing in a monopoly competition market similar to the full competition market. But these firms produce differentiated goods as they can easily pass each other instead of a homogeneous commodity as they are in the exact competitive market. The production of differentiated goods is one of the most important features of the monopoly competition market. At the same time, the firm, which is in competition with each other, is giving a kind of monopoly power. However, since a large number of companies are located in the market, the price policy of a company can not be influenced by other companies because the market share of each company is small.
Differentiated goods differ in things like: brand, packaging, point of sale, customer service, installment sales and advertising. The important thing is that the merchandise is preferable and easily indispensable to the seller’s merchandise in the buyer’s eyes. As an example, although there are a large number of psychiatrists on the market today, the fees of those who are popular among them are higher than the others. To give another example, there are many shops selling shoes. Shoes at these stores are different prices. Because the quality of the shoes in the buyer’s eye varies from shop to shop. For example, shoes sold in an ordinary shoe store in any country in the eyes of consumers are not the same as those shipped to elite stores such as Zara, Beymen and Vakko. Sometimes the exact same two goods may be different in the buyer’s eye because of the seller’s friendly and polite service style of the seller.
Monopoly is a competitive market, as it is in the full-fledged competition market, and it is easy and affordable for companies to enter the market or out of the market.
Due to the differentiated commodities in the monopolistic competition market, each firm has partial monopoly power, and for this reason a downward trending demand curve for each firm’s product will be found. A supply curve for the market is out of the question as each firm will set its own price to maximize profits.