Monopolistic competition

Monopolistic competition is a market structure that has a large number of competitors selling similar but not identical products to a large number of buyers.

Monopolistic competition means that there is a freedom of establishment but great product differentiation. When there is monopolistic competition, it means higher prices for consumers than in a perfect market.

In the short term, firms in a market with monopolistic competition make excess profits but the long-term gain will be normal because there is a freedom of establishment and more companies are entering the market when profits are good.