Difference Between Oligopoly and Monopolistic Competition

Difference Between Oligopoly and Monopolistic Competition

There is always a brand or two that takes the front line in producing and marketing particular products/services. Such companies are usually as professional as possible. They have a huge deposit of capital for their business, they understand the best strategies and apply them, they have the best employees, and they know who to target and when to do so.

As they have every capacity to do really well, they tend to dominate the market, and consumers see them as better than a few others that are in the same line of business.

This is mostly the case when there are few suppliers. However, it can also happen when there are many sellers. In this case, the big brands fight so hard to remain at the top and make themselves known to most consumers, and the smaller brands are just getting along.

In this article, we’ll be discussing the difference between oligopoly and monopolistic competition and how they relate to the big and small brands in a particular market.

Definition of Oligopoly Competition

This is a market situation where one or more organization dominate the output of the industry. In many cases, these large companies capture up to 90% of the market, leaving the remaining 10% to smaller organizations.

A major difference between oligopoly and monopolistic competition is that oligopolies do not play small. They go all the way to break the required barriers, in order to access the market, a thing smaller companies may not be able to do. When they make that breakthrough, they are able to earn and maintain an abnormally huge amount of money to make a profit. There is not a lot of freedom when it comes to entering or exiting this industry.

Definition of Monopolistic Competition

This is a different market situation with a large number of small dealers, and a notable freedom of entry and exit. This situation is a bit fairer as opposed to oligopolies. The requirement is not as high, and the competition is not as fierce.

This type of competition is differentiated into four categories, namely – human capital, physical products, marketing, and distribution.

Oligopoly vs Monopolistic Competition Comparison Table

Basis of Comparison Oligopoly Monopolistic
Meaning Few organization dominates the output of the industry with limited freedom of entry and exit Large number of small-size investment, and a notable freedom of entry and exit
Access and standard Low access and high standards High access and high standards
Market size Generally small Larger in number
Geographical location Suitable in large cities May be suitable in large or small cities

Conclusion of the Main Difference Between Oligopoly vs Monopolistic Competition

In both cases, competition is inevitable but imperfect. There are either too many or too few sellers. One difference between oligopoly and monopolistic competition is that the standard may be high or low depending on the industry you wish to venture into. This standard defines the size of the market, the location, and even the strategy used to operate the business.