The major diference between oligopoly and monopolistic competition is the size

and number of competing frms. Oligopoly refers to large frms having small
number of competitors while monopolistic competition is small frms with large
number of competitors. Another diference between the two is that oligopoly has
barriers to entry and exit in the maret or industry! while monopolistic
competition has freedom for entry and exit of industries.
under monopolistic competition! many sellers ofer diferentiated
products"products that difer slightly but serve similar purposes. #y
maing consumers aware of product diferences! sellers exert some
control over price.
in an oligopoly! a few sellers supply a sizable portion of products in the
maret. They exert some control over price! but because their products
are similar! when one company lowers prices! the others follow.
O$%&O'O$( A)* +O)O'O$%,T%- -O+'.T%T%O)/
Oligopoly and monopolistic competition have some similarities! but also
have a few important diferences. #oth are examples of imperfect
competition on the maret structure continuum between ideals of perfect
competition and monopoly. 0owever! oligopoly contains a small number of
large frms and monopolistic competition contains a large number of small
frms. The dividing line between oligopoly and monopolistic competition
can be blurred due to the number of frms in the industry.
Oligopoly is a maret structure containing a small number of relatively
large frms! with signifcant barriers to entry of other frms. +onopolistic
competition is a maret structure containing a large number of relatively
small frms! with relative freedom of entry and exit. 1hile it might seem
as though the diference between oligopoly and monopolistic competition
is clear cut! such is not always the case.
A comparison between these two maret structures is ofers a little insight
into each.
+any or 2ew/ The primary diference between oligopoly and
monopolistic competition is the relative size and the maret control
of each frm based on the number of competitors in the maret.
0owever! there is no clear3cut dividing line between these two
maret structures. %t is not possible to say that some number lie 45
frms is the dividing line! such that 45 frms mae it an oligopoly and
46 mae it monopolistic competition.
1hile one industry containing only 7 frms is clearly oligopoly and
another industry with 75!555 frms is undoubtedly monopolistic
competition! the structure of an industry with 75 frms or 755 frms
is not as obvious.
,uch industries might have characteristics of both oligopoly and
monopolistic competition. As the number of frms decreases! the
frms tend to behave more lie oligopoly and less lie monopolistic
competition.
*ominance by a 2ew/ %n some cases status depends more on the
dominance of a few frms rather than the total number of frms in
the industry. An industry with 7!555 relatively e8ual frms is most
assuredly monopolistic competition. 0owever! an industry with
7!555 frms! that is dominated by 7 relatively large frms! is most
liely oligopoly. 2or example! the petroleum extraction industry has
thousands of frms! but a handful of the largest frms dominate the
maret! maing it an oligopoly.
&eographic Area/ %n other cases! the geographic size of the maret
is the prime determinant of maret structure. A particular industry
might be monopolistic competition in a large city! but oligopoly in a
smaller town. 9etail sales ofer an example. $arger cities usually
have hundreds! even thousands! of shopping alternatives! including
discount super centers! mom3and3pop stores! shopping malls! and
nation3wide chains. ,uch a maret is monopolistic competition.
,maller towns! however! tend to have fewer stores! perhaps a single
super center or shopping mall and a handful of stores located in a
small downtown area. ,uch a maret is oligopoly.
#arriers to .ntry/ A ey diference between oligopoly and
monopolistic competition is barriers to entry. Oligopoly barriers are
high. +onopolistic competition barriers are low. 0owever! entry
barriers are a matter of degree. The need for government
authorization is one entry barrier that can create oligopoly!
especially if entry is limited to only a few frms. 0owever! it can also
create monopolistic competition if a larger number are allowed
entry. Other barriers! such as start3up cost and resource ownership!
also limit entry to diferent degrees! leading to either oligopoly or
monopolistic competition. +oreover! these entry barriers can
change over time! transforming oligopoly into monopolistic
competition or vice versa.
+onopolistic3 -lothing industries :all maing shoes! but each shoe is diferent
depending on the company;< #c of their maret power:some;! they are )OT
price taers.
Oligopoly3 &as industries :most gas stations will have about the same price per
gallon;< A say in price but most will be about the same
=. 1hat is the diference between oligopoly and monopolistic competition>
An oligopoly maret structure is one in which there are a few large producers
who are present in the industry and account for most of the output in the
industry! there are many small frms but these few large frms dominate and
have concentrated maret shares.
1hereas monopolistic competition is a maret structure that has a large number
of sellers! each of which is relatively small and posse a very small maret share.
Another feature of an oligopoly is that there are some barriers to entry and exit
into the industry. %n the short run! oligopolies are able to earn abnormal proft!
but in the long run as well they are able to sustain abnormal profts due to the
barriers to entry and exit.
The barriers act as a strong deterrent to frms that want to come into the
industry and ? eat into? the abnormal profts and then exit the industry. Thus not
many frms dare to venture into the industry@ therefore oligopolies can earn
abnormal profts in the long run as well unlie frms in monopolistic competition
AAAexemple
noia! samsung ! sony ericsson ! $&and i3mobile are good examples but
there are better examples. The best are the ones that you donBt now
about because it shows how far they reach. 2or example@ did you now
'hilip +orris owned Craft> :not sure if they still do; . #ut in my opinion the
most monoplistic companies are the few food distributors that exist in the
Dnited ,tates / +onsanto and *u'ont :9./ The 2uture of 2ood; also loo
into 1almart : 9./ The 0igh -ost of $ow 'rices; and donBt forget
9etail stores is a exemple of monopolistis compition.
Monopolistic Large differentiate small Some Control Not Free Restaurants, movies
Oligopoly
Few differentiate Homogeneous large may
May notDepends on teMar!etFood oil,S"M Card
#oug L$% is produced in &anglades, $nilever maintains te same standard all around
tegl o'e( Si nce t e demand f or t e 'eaut y s oap mar !et i s t o a gr eat
e)t ent
oligopolistic
,variations to price lead to a price war wic can eventually 'rea! down
company*s mar!et sare( So te price is afforda'le 'y most of te people( $nilever
&anglades as outsourced itsdistri'ution cannels to tird party distri'utors wic allow
tem distri'ute L$% in massive 'ul!samounting to around ten million pieces( "t underta!es
te largest promotional activities in te'eauty soap industry

Mar!et Competition+
#e 'eauty soap industry as a few ma,or producers of wic $nilever olds mar!et sare
of sligtly less tan -./( Oter competing 'rands li!e #i''et, 0romatic, Life'uoy and 1eya
avestarted to ave strong consumer 'ase, 'ut L$%*s product features distri'ution and
promotionalactivities ave created ig 'rand loyalty for wic it is still te mar!et leader(
2rounds 'eind L$% for wic "t supports Oligopoly
3
Small num'er of firms
+ in oligopoly tere are ,ust a few firms( #ere must 'e severalfirms dominating te industry
so tat tey really a'le to set te price( "n our country, tis soap mar!et as fewer industries wic
resem'les wit te oligopolistic feature(
"nterdependence
+ wen tere are only a few large firms dominating, te industry, teycannot act
independently of one anoter( 4ac firm will react to wat te oter firms doin terms of
output and price, as well as to canges in 5uality and product differentiation("n our country
we can see, te price of every soap 'ar including Lu) is witin a certainrange and it is afforda'le
'y rural people also(

3
&arriers to entry
+ it is possi'le tat certain 'arriers to entry ave prevented morecompetition in
oligopolistic industries( &arriers may include legal 'arriers, suc as patents, control
and ownersip over critical supplies and so on( &ut tere may 'e entry'ar r i er s of a l es s
over wel mi ng !i nd wi c may r es ul t i n t e pr es ence of s ome competitors 'ut
as many as would create a mar!et structure of monopolistic competition(May 'e tat is wy tere are few soap
industries in our country(
3
Limit pricing
+ in oligopolistic mar!et tere is more tan one competitor and tey all sare te
goal of see!ing to prevent yet more competitors appearing on te scene( #econcept of limit
pricing is ,ust suc a concept( "t refers to te possi'ility tat oligopolists ,ointly see! to agree on a
price wic is te igest tey carge witout prompting a newentrant to appear( #e iger te
'arriers to entry are, ten te iger is te possi'lelevel of te limit price(
3
Non67rice competition+
'y teir very nature, oligopolistic firms do not usually e)i'itactive price competition( "t is an
attempt 'y one oligopolistic firm to attract customers 'ysome means oter tan a price
differential( &eing a oligopolist competitor Lu) followedsome strategies as non6price competition
strategy 8