Definition of 'Monopoly' A situation in which a single company or group owns all or nearly all of the market for a given

type of product or service. By definition, monopoly is characterized by an absence of competition, which often results in high prices and inferior products. According to a strict academic definition, a monopoly is a market containing a single firm. In such instances where a single firm holds monopoly power, the company will typically be forced to divest its assets. Antimonopoly regulation protects free markets from being dominated by a single entity. "Monopoly" is a term from economics that refers to a situation where only a single company is providing an irreplaceable good or service. Because the firm in question is the only place where the good or service can be found, they have the ability to charge whatever they want, to the detriment of market competition that is the foundation of a healthy economy. Such a company is said to be monopolizing a portion of the market. A recent example of a monopoly would be that of the pharmaceutical giant Pfizer over the drug Viagra, which at the time of its release had no substitutes or competitors. This was a side effect of being the inventor of a product for which there is high demand but no preexisting supply. Other monopolies occur when consolidation across industries results in a single supplier. This was the case with the company Standard Oil, which had to be broken up by the government in 1911. Some economists argue that the market should be left alone almost entirely by the government, and if monopolies form, that is the will of the market and should not be meddled with. Most economists, however, even those who wish for low government interference in private markets, acknowledge that in some special interests an anti-trust action, such as an anti-monopoly legal ruling, is absolutely necessary.

What is monopolistic competition? Definition A market structure in which several or many sellers each produce similar, but slightly differentiated products. Each producer can set its price and quantity without affecting the marketplace as a whole. In a monopolistic market a large number of sellers or producers sell differentiated products. It differs from perfect competition that the products sold by different firms are not identical. That is why in a monopolistic market sellers can sell differentiated products in slightly different prize. As example Nokia sells its Music Express phones in slightly higher price than the other music phones of other companies because of its differentiated features. The model of monopolistic competition describes a common market structure in which firms have many competitors, but each one sells a slightly different product. Monopolistic competition as a market structure was first identified in the 1930s by American economist Edward Chamberlin, and English economist Joan Robinson. Many small businesses operate under conditions of monopolistic competition, including independently owned and operated high-street stores and restaurants. In the case of restaurants, each one offers something different and possesses an element of uniqueness, but all are essentially competing for the same customers. A market structure characterized by a large number of small firms, similar but not identical products sold by all firms, relative freedom of entry into and exit out of the industry, and extensive knowledge of prices and technology. This is one of four basic market structures. The other three are perfect competition, monopoly, and oligopoly. Monopolistic competition approximates most of the characteristics of perfect competition, but falls short of reaching the ideal benchmark that IS perfect competition. It is the best approximation of perfect competition that the real world offers. The concept of monopolistic competition is more realistic than perfect competition and pure monopoly. According to Chamberlain in real economic situation both monopoly and competitive elements are present. Chamberlains monopolistic competition is the blending of competition and monopoly. The

most distinguishing feature of monopolistic competition is that the products of various firms are not identical but different although they are close substitutes for each other. Like perfect competition there are a large number of firms but unlike perfect competition the firms produce differentiated products which are close substitutes of each other. Under monopolistic competition there is freedom of entry and exit. Thus under monopolistic competition it is found that both the features of competition and monopoly are present. In India, for example, we find the monopolistic competition. In India there are a number of manufacturers producing different brands of tooth paste viz Colgate, Pepsodent. Promise, Close-up, Prudent and Forhans etc. The manufacturer of Colgate has got the monopoly of producing it. Nobody can produce and sell tooth paste with the name Colgate. But at the same time he faces competition from other manufactures of tooth paste as their products are close substitutes of Colgate tooth paste. Thus we find that monopolistic competition is the real market structure than either pure competition or monopoly.

Important features of monopolistic competition

(1)Existence of large number of firms: The first important feature of monopolistic competition is that there are a large number of firms satisfying the market demand for the product. As there are a large number of firms under monopolistic competition, there exists stiff competition between them. These firms do not produce perfect substitutes. But the products are close substitute for each other. (2) Product differentiations: The various firms under monopolistic competition bring out differentiated products which are relatively close substitutes for each other. So their prices cannot be very much different from each other. Various firms under monopolistic competitors compete with each other as the products are similar and close substitutes of each other. Differentiation of the product may be real or fancied. Real or physical differentiation is done through differences in materials used, design, color etc. Further differentiation of a particular product may be linked with the conditions of his sale, the location of his shop, courteous behavior and fair dealing etc. Eg.Apple's iPhone. It's pretty much the same as any other phone. It has touch screen capability, can surf the web, can listen to music, but the apple brand as well as advertising makes it a big hit on the market of cell phones.

(3) Some influence over the price: As the products are close substitutes of others any reduction of price of a commodity by a seller will attract some customers of other products. Thus with a fall in price quantity demanded increases. It therefore, implies that the demand curve of a firm under monopolistic competition slopes downward and marginal revenue curve lies below it. Thus under monopolistic competition a firm cannot fix up price but has influence over price. A firm can sell a smaller quantity by increasing price and can sell more by reducing price. Thus under monopolistic competition a firm has to choose a price-output combination that will maximize price.

(4) Absence of firm's interdependence:

Under oligopoly, the firms are dependent upon each other and can't fix up price independently. But under monopolistic competition the case is not so. Under monopolistic competition each firm acts more or less independently. Each firm formulates its own price-output policy upon its own demand cost. (5) Non-price competition: Firms under monopolistic competition incur a considerable expenditure on advertisement and selling costs so as to win over customers. In order to promote sale firms follow definite -methods of competing rivals other than price. Advertisement is a prominent example of non-price competition. The advertisement and other selling costs by a firm change the demand for his product. The rival firms compete with each other through advertisement by which they change the consumer's wants for their products and attract more customers. Some examples of non-price competition Store loyalty cards Banking and other financial services Home delivery systems Child services Extension of opening hours Internet shopping for customers Warranties

(6) Freedom of entry and exit: In a monopolistic competition it is easy for new firms to enter into an existing firm or to leave the industry. Lured by the profit of the existing firms new firms enter the industry which leads to the expansion of output. But there exists a difference. Under perfect competition the new firms produce identical products, but under monopolistic competition, the new firms produce only new brands of product with certain product variation. In such a law the initial product faces competition from the existing well- established brands of product.

(7)Relative Resource Mobility: Monopolistically competitive firms are relatively free to enter and exit an industry. There might be a few restrictions, but not many. These firms are not "perfectly" mobile as with perfect

competition, but they are largely unrestricted by government rules and regulations, start-up cost, or other substantial barriers to entry. (8) Extensive Knowledge: In monopolistic competition, buyers do not know everything, but they have relatively complete information about alternative prices. They also have relatively complete information about product differences, brand names, etc. Each seller also has relatively complete information about production techniques and the prices charged by their competitors.

Equilibrium under monopolistic competition Monopolistic Competition is a market structure featuring few large and many small firms, fairly low entry barriers similar goods and relatively high competition. Over the short-run, firms can usually gain some abnormal profit, but over the long run, other firms entering the market due to the low entry barriers will compete and make the price lower. In the short run supernormal profits are possible, but in the long run new firms are attracted into the industry, because of low barriers to entry, good knowledge and an opportunity to differentiate.

Monopolistic competition in the short run Short run is a time period in which at least one factor of production is fixed; long run is when all factors of production are variable. Short-Run Equilibrium

The firm will produce quantity Qs at price Ps. The firm produces where marginal cost (MC) and marginal revenue (MR) curves meet, because MC is the cost of producing an one more of the good and MR is the revenue of selling one more good and their meeting point is the most efficient production. This means that the shaded area between Ps, ACs (average cost of producing one good at this quantity) and the AR curve (average revenue curve) is the abnormal profit the firm makes. AR is equivalent to the demand curve and is the average revenue the firm makes per item sold. Producing at this point ensures the highest amount of profit. Thus, equilibrium is created in the short run.

Monopolistic competition in the long run In the long run, there are no abnormal profits because of the features of Monopolistic competition. There are a few large firms, but many small firms that will compete for profit and thus drive the price down. Also, low entry barriers mean new firms will enter the market and further add competition. Finally, the goods are similar enough to ensure that competition will always remain high.

Long-Run Equilibrium

In this diagram, the firm produces where the LRMC, or long run marginal cost curve, and the marginal revenue curve meets. The LRMC describes the cost of producing one more of the good when no factors of production are fixed over the long run. That point is, in the long run, equivalent to the LRAC, or long run average cost curve, which shows them average cost of producing one good at this quantity over the long run. Because the LRAC curve is above the AR curve, there is no abnormal profit, as the average cost of the good equals the average revenue of the good. Thus, in the long run, equilibrium is acquired.

Essentially, the difference between short and long run equilibrium is that in short run equilibrium; the firm can gain abnormal profits. Over the long run, that is impossible Examples of monopolistic competition

Examples of monopolistic competition can be found in every high street. Monopolistically competitive firms are most common in industries where differentiation is possible, such as:

The restaurant business Hotels and pubs General specialist retailing Consumer services, such as hairdressing

The survival of small firms The existence of monopolistic competition partly explains the survival of small firms in modern economies. The majority of small firms in the real world operate in markets that could be said to be monopolistically competitive. Inefficiency The firm is allocatively and productively inefficient in both the long and short run.

There is a tendency for excess capacity because firms can never fully exploit their fixed factors because mass production is difficult. This means they are productively inefficient in both the long and short run. However, this is may be outweighed by the advantages of diversity and choice. As an economic model of competition, monopolistic competition is more realistic than perfect competition - many familiar and commonplace markets have many of the characteristics of this model.

Monopolistic Versus Perfect Competition _ Excess Capacity 1. The quantity of output produced by a monopolistically competitive _rm is smaller than the quantity that minimizes average total cost (the e_cient scale).

2. This implies that _rms in monopolistic competition have excess capacity, because the _rm could increase its output and lower its average total cost of production. 3. Because _rms in perfect competition produce where price is equal to the minimum average total cost, _rms in perfect competition produce at their e_cient scale. _ Markup over Marginal Cost 1. In monopolistic competition, price is greater than marginal cost because the _rm has some market power. 1. In perfect competition, price is equal to marginal cost.

Advantages of Monopolistic Competition 1. The Promotion of Competition (lack of Barriers to Entry) In such a market, one of its primary aspects is that there a lack of barriers to entry (factors that cause difficulty for a new firm to enter the market e.g. intellectual property rights, advertising, large start-up costs etc.), hence making it relatively easy for firms to enter (and exit) the market. This therefore ensures (at least in the long run) no 'single firm' will find themselves with monopoly power (and with that -- the ability to exploit consumers), due to new entering firms to the market. 2. Differentiation Brings Greater Consumer Choice and Variety

One of the main positives to come out of a monopolistically competitive market is that in order to be a competitive firm within such a market place, a firm's primary goal is to differentiate itself from others in order to gain greater custom than its rival competitors -- essentially appealing to consumer sovereignty (where consumers determine the goods to be produced within a market). With this, is the provision of greater choice and variety of products and services for consumers to purchase from -- they have a wider range of consumer choice as opposed to just a single choice (either just one product -monopoly -- or all the products are generic and homogenous -- perfectly competitive). 3. Product and Service Quality - Development Another potential merit of monopolistic competition is that of incentives for firms to improve product quality in order to gain (temporary) economic profit -which in some aspects relates to the above point on some levels. "Monopolistically competitive industries are in a constant state of flux"[4405] -- they are always trying to edging on ways to make profit, whether that is by lowering the cost of production or by improving on their product. The process of 'creative destruction' -- the drive to ensure short term gain. 4. Consumers Become More Knowledgeable of Products A positive externality from monopolistic competition and the intense advertising and marketing that accompanies it, is that due to firms trying to differentiate their products -- consumers become more informed and aware of their options regarding such products and services. They can gain an understanding of the unique features and aspects that certain products have compared to that of others. Hence, with this comes further competition, as firms can recognize what consumers are wanting to a better degree.

Disadvantages of Monopolistic Competition 1. They can be Wasteful -- Liable of Excess Capacity A negative factor of firms that are in monopolistic competition is that they don't produce enough output to efficiently lower the average cost and benefit from economies of scale. As if they were to do this (as from the graph)[4405] they are reducing their 'economic profits', as a result of the marginal revenue being less than that of the marginal cost. Moreover, the funding and expense that goes into packaging, marketing and advertising can deemed extremely wasteful on some levels. 2. Allocatively Inefficient

Compared with perfect competition, it can be shown that such firms (particularly from the video above) that there is an element of allocation efficiency as the price is above that of the marginal cost curve -- less so in the long run, due to more competition. As the demand curve is one which is downward sloping this then implies the price has to be greater than the marginal cost for a monopolistically competitive firm. Hence it is allocatively inefficient as not enough of the product gets produced for society to benefit -they want more, however this would force the company to lose money. 3. Higher Prices Another drawback of a monopolistic competition is that as a result of firms having 'some market power', they can extenuate a mark-up on the marginal cost of revenue. Compared to a perfectly competitive firm, who have their price equal to their marginal cost. Causing a deadweight loss in society as described above. This would be difficult for a governmental authority to regulate for two reasons: i) there are many firms and ii) they would be making a loss -- hence eventually forcing such firms out of business.

4. Advertising Although, as stated earlier, advertising and marketing can be beneficial to consumers on some levels such as providing information to customers and from this an increase in competition, it can also have negative impacts on consumer sovereignty. It is argued to manipulate and distort what consumers desire, as well as obviously reducing competition as consumers become captivated over the perception of differentiation.
FMCG Companies India is a big hub for Fast Moving Consumer Goods (FMCG) companies. More than 100 crore people of this country depend on FMCG companies for their daily products. Really India is the best destination for the big players. Here is the list of top 20 FMCG Companies in India. Top 20 FMCG Companies in India Hindustan Unilever Ltd. ITC (Indian Tobacco Company) Nestl India GCMMF (AMUL)

Dabur India Ltd Asian Paints (India) Cadbury India Britannia Industries Ltd. Procter & Gamble Hygiene and Health Care Marico Industries Ltd. Colgate-Palmolive (India) Ltd. Gillette India Ltd. Godfrey Phillips Henkel Spic Johnson & Johnson Modi Revlon Wipro Nirma Ltd Amul India Godrej Consumer Products Ltd

Fmcg Product Company Out of the various forms of market like perfect competition, monopoly etc. monopolistic competition usually exists in the real life situation. It is that form of market wherein there are many sellers of the product, but the products sold are a bit differentiated from each other. This product differentiation manifests itself in trade marks, name of the brand, quality and services offered to customers. There are many examples of this kind of market. Firms producing different brands of toothpastes, come under the category of monopolistic competition.

This market situation is a combination of monopoly and perfect competition. For instance, Colgate Company has the monopoly over

Palmolive trade mark. No other firm can give this name to its product. At the same time several other firms producing soaps may exists which substitute Palmolive brand. In this way this market form has features of both monopoly and perfect competition.

It has features of competition in as much as several firms produce close substitutes. Features of monopoly are indicated in terms of product differentiation. Here number of seller is large but not making homogeneous goods like perfect competition, instead they make goods on which they have a monopoly as far as product differentiation is concerned.

Under perfect competition a firm is said to be a price taker and in monopoly it is said to be a price maker. What should be the scenario for monopolistic competition?

A firm under this form of market neither exercises full control over the price, nor zero control over the price. It exercises partial control over the prices. This is possible by way of differentiating their products from those of rivals in the same industry.