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.
Table of contents
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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.
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.
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Examples of Monopoly Explained in Video
Monopoly vs Monopolistic Competition Infographics
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Key Differences
The key differences are as follows:
- The monopoly and monopolistic competition are different as the basic difference is the number of players in the markets. A single seller creates a monopoly competition. At the same time, monopolistic competition requires at least two but not many sellers.
- Due to more players in monopolistic competition, there is competition in sales and prices. Monopoly enjoys the sole control of the 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, which hardly affects an economy’s overall demand and supply pattern.
- The single-player solely enjoys profitsProfitsProfit refers to the earnings that an individual or business takes home after all the costs are paid. In economics, the term is associated with monetary gains. read more from the product’s sale under monopoly markets. A couple of sellers offer products in the other market; hence, market sales and profits are shared.
- Generally, a monopoly scenario is possible for either designer commoditiesCommoditiesA commodity refers to a good convertible into another product or service of more value through trade and commerce activities. It serves as an input or raw material for the manufacturing and production units.read more or a product with little existence in the mass market. A monopolistic competition scenario is more prevalent in practicality. The products generally include consumer-related items, although recently, there has been a huge introduction to real estateReal EstateAt its most basic principle, Real Estate can be defined as properties that comprise land and its tangible attachments. The land includes the actual surface of the earth and any permanent natural objects such as water, dirt, or rock and any minerals or particulars under the surface. read more, education, and hospitality industries.
Monopoly vs Monopolistic Competition Comparative Table
| Basis | Monopoly | Monopolistic Competition |
|---|---|---|
| Meaning | The 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. |
| Players | The single-player in the market. | More than one 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, 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 & Supply | Demand 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 & Exit | Entry and exit are extremely difficult in such a market. | Comparatively easier. |
| Price of Product | The 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 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 in the market. |
| Predictability of Product | Highly 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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