Difference Between Monopoly and Monopolistic Competition
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 whereas a monopolistic competition is a competitive market that has only a handful of buyers and sellers that offer close substitutes to the end users.
A monopoly is a state 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 and sells his uniquely designed well-accepted product to consumers.
Monopolistic Competition is a state in markets whereby there are a handful of sellers offering a particular product to consumers due to which minimal competition is created, and variants in the characteristics and quality of products are available.
Example of Monopoly Competition
Although an ideal monopoly market is hard to exist in reality, some examples can be quoted from the government sector. The government provided infrastructure like railways between cities that are still under a monopoly market. The competition is absolutely nil and product-related characteristics are all under the discretion of the government.
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Example of Monopolistic Competition
In the ideal markets, most consumer products are a part of monopolistic competition. We can consider examples of day to day needs like cosmetics, grocery products, garments, or medicines. There are a handful of sellers and hence there is elasticity in demand-supply-price patterns.
Monopoly vs Monopolistic Competition Infographics
The key differences are as follows-
- Monopoly vs monopolistic competition differs from each other. The basic difference is the number of players existing in monopoly and monopolistic competition markets. A monopoly is created by a single seller whereas monopolistic competition requires at least 2 but not a large number of sellers.
- Due to more numbers of players in monopolistic competition, there exists a competition in sales and prices. Monopoly enjoys the sole control overall characteristics of its products.
- A monopoly in the market makes it extremely difficult for new entrants and the exit of the existing player, due to the good acceptability and nature of the product. In monopolistic competition, entry and exit are easy for other players, and it hardly affects the overall demand and supply pattern of an economy.
- Profits earned from the sale of the product under monopoly markets is solely enjoyed by the single player. Products in the other market are offered by a couple of sellers, hence market sales and profits are shared between all of them.
- Generally, a monopoly scenario is possible for either designer commodities or a product with a little existence in the mass market. A monopolistic competition scenario is more prevalent in practicality; products generally include consumer-related commodities, although recently there has been a huge introduction to the likes of real estate, education, and hospitality industries.
Monopoly vs Monopolistic Competition Comparative Table
|Meaning||The market created for a product that is offered by a single seller – no competition.||Any product being offered by a handful of sellers, effecting a small competition between them.|
|Players||The single-player in the market.||More than 1 but a small number in the market.|
|Competition||No competition for the seller.||As a few players exist, minimal competition exists, although not good enough for controlling the demographics.|
|Effect||Due to the monopoly of the single-player, products, its 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 & Supply||Demand and supply depend on the seller, although it may not be too biased on the seller side due to the nature of the commodity.||Demand and supply can be controlled.|
|Entry & Exit||Entry, as well as exit, is extremely difficult from such a market.||Comparatively easier.|
|Price of Product||The price of the product is decided by the seller – hardly any control from the buyer front. The buyer is forced to accept the seller’s price.||Buyers may have a small controlling power on the price of such products.|
|Variety in Product||Variants in a particular product may or may not exist depending upon the seller.||Variants do exist which are produced by the different players of the market.|
|Predictability of Product||Highly predictable as there is only one seller.||Very unpredictable.|
Whereas the monopoly is an extreme situation and hardly exists in today’s environment, it is not completely non-existent. Monopolistic competition is a global phenomenon prevalent in almost all sectors of the market. It brings in the scope of elasticity in commodity prices and consumers can create supply patterns as per their demands.
While monopoly is something every company would desire, however, a successful market should always have a healthy monopolistic competition.
This has been a guide to Monopoly vs Monopolistic Competition. Here we discuss the key difference between monopoly and monopolistic competition along with infographics and comparison table. You may also have a look at the following articles –