monopolistik

Monopolistik, or monopolistic competition, is a market structure characterized by many firms selling products that are close substitutes but differentiated in some way, along with free entry and exit from the market. In this model, each firm has some degree of market power to set prices but faces competition from many rivals.

Product differentiation may be based on branding, quality, location, service, or product variety. As a result, the demand for an individual firm's product is downward sloping, and firms engage in non-price competition such as advertising and product development to attract customers.

A firm chooses its output where marginal revenue equals marginal cost. Because the demand faced is not perfectly elastic, price exceeds marginal cost. In the short run, firms can earn supernormal profits or incur losses depending on conditions.

In the long run, new entrants erode profits, and economic profits tend toward zero. The equilibrium typically features prices that equal average total cost, but output below the efficient scale, implying excess capacity.

Monopolistic competition is less efficient than perfect competition in terms of productive and sometimes allocative efficiency, yet it can deliver benefits through product variety and innovation. Critics point to advertising costs and market power from differentiation as potential distortions.

Examples include many consumer services and retail sectors, such as restaurants, clothing stores, and hair salons. The concept was developed in the 1930s by economists Edward Chamberlin and Joan Robinson, who emphasized how differentiation creates market power even with many sellers.