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Features of Monopolistic Competition Microeconomics Essay


Note: The video has Closed Captioning. To activate it, start the video, mouse over the bottom of the video and click on the CC icon, then select from the menu.

This week we shall look at Monopolistic Competition.  This is where you, as a consumer, spend most of your time.  In Monopolistic Competition, there are many companies selling similar but not identical products.  Put differently, the goods are close, but not perfect substitutes.

Because of the relative ease of substitution, companies often compete by advertising, services (for stores), brand names, brand loyalty and product differentiation more than by price.  Thus, prices of competing products tend to be close, but not identical as they are in Perfect Competition.

Since this market is where you – as a consumer – spend most of your time and a lot of your money, this week you are going to look at this market in action in your daily life.  When you go shopping this week, pay close attention to product prices and what information they tell you about how the products compete.

A grocery store is a good example.  Look at the soda aisle and by viewing the prices and the product locations on the shelves, which products are close substitutes, sufficiently differentiated that they have brand loyalty (i.e., a higher price), etc.  Do the same with canned vegetables.  Or undertake the same observational experiment in another type of store you regularly frequent.

Assignment Summary:

Watch      the video above and under the Week 4 Videos, watch all videos.

Then      go to a store, as discussed above, and observe.  Observation is a      well-established method of real world research.  It will probably be      easier and perhaps more informative if you pick on one product line to      observe and observe by brand name. In particular, look for:

product       prices,

product       packaging (design, colors, logos, etc.); and,

product       shelve placement relative to other similar products.

Based      on what you observe can you identify:

which       products/brand names compete most closely with each other?  Are they       placed close to each other on the shelves or far apart?

which       products/brand names are aimed at cost conscious consumers?  Where       are these on the store shelves for grocery stores?

which       are aimed at higher end consumers? Where are these on the store shelves       for grocery stores?

which       products/brand names have a narrower market and command brand       loyalty?  This one could be tricky to figure out.

  1. Share      what you find with the class on the discussion board.

What       do you think you have learned from this activity? 

What       have you learned about monopolistic competition?

  1. Post      your views to the discussion board and refer to at least two different      concepts from this week’s Chapters. Your illustration of concepts MUST      include an explanation why you think they are relevant to the week’s topic      using specific information from the articles, videos and other research      that you have done. Video 

thanks.. see below for feedbacks1.  This weeks discussion was pretty interesting! I decided to go to my local Publix grocery store to check things out. I started in the cereal isle and compared brand name Cheerios Cereal to the generic Publix brand Toasted Oats Cereal. One of the first things I noticed was the difference in packaging and advertising. The Cheerios brand cereal box was bright yellow and the cereal is pictured inside a heart shaped bowl to reference this product as being “heart healthy”. The Publix brand Toasted Oats cereal is in a bland white box with a small yellow section at the top of the box, and is pictured in a regular bowl. Comparatively, the two had completely different marketing/advertising strategies. At this particular Publix, the brand name Cheerios cereal was located right beside the Publix brand Toasted oats on the shelf. The pricing was also significantly different. The Cheerios brand 12 oz box of cereal is $5.09 and the Publix Toasted Oats generic 12 oz box of cereal is $2.75. In addition, this weeks BOGO included Cheerios brand cereal 18 oz box, which usually sells for $5.95. The BOGO items are displayed in the front of the store and in the center walkway of the store for better view. In this particular scenario, buying the Cheerios brand cereal would be cheaper due to the BOGO sale. From grocery, to beauty, Publix has their own brand of products located throughout the store, and usually places their brand on the same shelf right beside the name brand item. I also noticed that some of the vitamin/supplements did not have generic options, requiring brand loyalty. This activity made me more aware of how advertising and placement of products effects consumer purchases. My interpretation of monopolistic competition would be multiple small firms, offering similar products, that are fairly easy to enter and have a small amount of price setting power.        2.   Monopolistic competition is a market structure where various firms produce and offer differentiated products which are close but not perfect substitutes with each other and highly compete with each other on various factors other than prices. A good example of monopolistic competition are coffee shops. Starbucks and Dunkin Donuts are essentially selling a similar product (coffee) but the coffee is not the exact same from both companies. Not only do these two coffee shops differentiate in prices, but also quality and/or services. The marketing for Dunkin Donuts and Starbucks is also different with Dunkin Donuts having a fun and friendly pink and orange logo while Starbucks has a more upscale logo and “fancier” names to their types of coffees. If you’ve noticed, Dunkin Donuts has more advertising than Starbucks Coffee does. Dunkin uses a more traditional type of advertising while Starbucks creates a connection with customers through their in-store experiences. The barriers to entry for the coffee industry is low with many local pop-up coffee shops adding a more personal experience for consumers, less wait times to receive their products and cheaper prices. I am a fan of both brands; I go to whichever coffee shop has the shortest drive through lines in the mornings.        WC: 207    Champagne, C. (2014, August 22). Dunkin’ donuts and Starbucks: A tale of two coffee marketing giants. Fast Company. Retrieved October 20, 2021, from    Vaidya, A. byT. A. R. byD., Agarwal, A. byT., by, A., Agarwal, T., Vaidya, R. byD., by, R., & Vaidya, D. (2021, July 6). Monopolistic competition examples. WallStreetMojo. Retrieved October 20, 2021, from


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