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11: Monopolistic Competition and Oligopoly

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    • 11.1: Introduction
      This page examines monopolistic competition and oligopoly, identifying them as market structures between perfect competition and monopoly. It highlights instances of collusion among firms in the laundry detergent and ice industries. Monopolistic competition involves many firms with differentiated products, while oligopoly consists of a few dominant firms whose strategies depend on their competitors. The chapter analyzes how these firms aim to maximize profits within their competitive landscapes.
    • 11.2: Monopolistic Competition
      This page discusses monopolistic competition, where firms sell differentiated products and set prices based on perceived demand. It highlights profit-maximizing output through marginal revenue and marginal cost, with advertising influencing consumer preferences. While firms have more pricing power than in perfect competition, market entry leads to zero economic profits in the long run. This market structure is less efficient but promotes product variety, sparking debate on its societal benefits.
    • 11.3: Oligopoly
      This page discusses the dynamics of oligopolies and duopolies, emphasizing the conflict between cooperation and self-interest, akin to the prisoner's dilemma. It highlights how firms may reduce output together for higher profits but may also cheat, resulting in lower overall profits. Examples include the Lysine cartel's legal issues and the inefficiencies of monopolistic competition.
    • 11.4: Key Terms
      This page defines economic concepts such as cartel, collusion, and duopoly within market structures. It explains imperfect competition, kinked demand curves in oligopolies, and monopolistic competition with differentiated products. Game theory and the prisoner’s dilemma are introduced, illustrating the advantages of cooperation over self-interest. Product differentiation is emphasized, showing how firms distinguish their products from competitors.
    • 11.5: Key Concepts and Summary
      This page explains monopolistic competition, where many firms sell differentiated products with downward-sloping demand curves, aiming to maximize profits where marginal revenue equals marginal cost. In the long run, economic profits attract new firms, while losses lead to exits. Monopolistically competitive firms lack efficiency due to higher prices and lower output.

    This page titled 11: Monopolistic Competition and Oligopoly was last modified on Sun, 01 Mar 2026 18:36:04 GMT and is shared under a CC BY 4.0 license and was authored, remixed, and/or curated by OpenStax via source content that was edited to the style and standards of the LibreTexts platform.