Monopoly vs Monopolistic Competition

Updated on April 8, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Difference Between Monopoly and Monopolistic Competition

A monopoly is a market structure where the participant is a single seller that dominates the overall market as he is offering a unique product or service. In contrast, monopolistic competition is a competitive market with only a handful of buyers and sellers who provide close substitutes.

A monopoly is prevalent in the markets during which a particular product in reference is offered by a single seller who does not have any competition from other sellers. He sells his uniquely designed, well-accepted product to consumers.

MonopolisticMonopolisticMonopolistic refers to an economic term defining a practice where a specific product or service is provided by only one entity. Hence the entity supplying the product or service has the dominance in its price-fixing and deciding on the market output.read more competition is a state in markets whereby a handful of sellers offer a particular product to consumers. As a result, minimal competition is created, and variants in the characteristics and quality of products are available.

Monopoly vs Monopolistic Competition

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Example of Monopoly Competition

Although an ideal monopoly market is hard to exist in reality, we can quote some examples from the government sector. The government-provided infrastructureInfrastructureInfrastructure refers to fundamental physical and technological frameworks that a region or industry establishes for its economy to function properly.read more like railways between cities is still under a monopoly market. The competition is nil, and product-related characteristics are all under the government’s discretion.

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Example of Monopolistic Competition

In the ideal markets, most consumer products are a part of monopolistic competition. There are a handful of sellers, and hence demand-supply-price patterns are elastic. We can consider examples of day-to-day needs like cosmetics, grocery products, garments, or medicines.

Examples of Monopoly Explained in Video

 

Monopoly vs Monopolistic Competition Infographics

Monopoly vs Monopolistic Competition - Infographics

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Key Differences

The key differences are as follows:

Monopoly vs Monopolistic Competition Comparative Table

BasisMonopolyMonopolistic Competition
MeaningThe market is created for a product offered by a single seller – no competition.Any product provided by a handful of sellers affects a small competition between them.
PlayersThe single-player in the market.More than one but a small number in the market.
CompetitionNo competition for the seller.As a few players exist, minimal competition exists, although not good enough for controlling the demographics.
EffectDue to the monopoly of the single-player, products, their demand and supply, and price are controlled by the seller – hardly any control by the buyer side.Due to a small competition, there is some control from the buyer front.
Demand & SupplyDemand and supply depend on the seller, although it may not be too biased on the seller’s side due to the nature of the commodity.Demand and supply can be controlled.
Entry & ExitEntry and exit are extremely difficult in such a market.Comparatively easier.
Price of ProductThe seller decides the product’s price – hardly any control from the buyer front.Buyers may have a small controlling power over the cost of such products.
Variety in ProductVariants in a particular product may or may not exist depending upon the seller.Variants do exist which are produced by the different players in the market.
Predictability of ProductHighly predictable as there is only one seller.Very unpredictable.

Final Thoughts

Monopolistic competition is a global phenomenon prevalent in almost all market sectors. It brings in the scope of elasticity in commodity prices, and consumers can create supply patterns as per their demands. Although the monopoly is extreme and hardly exists in today’s environment, it is not completely non-existent.

While monopoly is something, every company would desire, however, a thriving market should always have a healthy monopolistic competition.

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