According to Prof. Chamberlin, one of the main feature of monopolistic competition is product differentiation. Product differentiation means that goods are close substitutes but are not homogeneous. They differ in colour, name, packing , size, quality etc. one gets variety of tooth pastes in a monopolistic market, namely, fortans, libaca, colgate, signal, choice etc. likewise there are different varieties of soft-drink, such as, compa cola, Thumps up, limca etc. These products are close substitutes, but at the same time they differ from one another.
Main features of product differentiation:
(1) Because of product differentiation, goods are not homogeneous as in perfect competition
(2) Product differentiation is a real situation of the market. These goods are close substitutes.
(3) Product differentiation may be both real and artificial.
(4) Under product differentiation, producer gets the name or brand of his product legally patented it means that producer alone has the legal monopoly of producing the patented product under the given name, design etc. For example, maruti udyog limited alone can produce maruti cars, Remington . Electronic Typewriter. These firms get the trade marks of their products registered. No others firm can use that mark on its product. However , it can produce close-substitute under another trade mark and thus complete with other sister firms.
(5) Aim of product differentiation in to control, price and increase profit . Product differentiation may increase average cost.
(6) According to Chomberlin, product differentiation satisfies peoples urge for variety. Hence it becomes necessary to pay a little higher price.
Definition of Product Differentiation:
So for all above you can define according to Chamberlin
“ A general class of product is differentiated if only sufficient basis exists for distinguishing the goods ( or services) of one dealer from those of another. Such a basis may be real of fancied, so long as it is of any importance whatever to buyers and leads to a preference for any variety of the product over another”.
Examples of product Differentiation :
Examples of product differentiation are as follows. Like they forhans, cibaca , colgate, choice etc. Simillary in soft-disk such as campa cola, Thumsup, Limca etc.
So from above example, this is clear that product differentiationn menas that goods are close substitutes but are not homogeneous.
Sunday, May 31, 2009
Oligopoly:-
Oligopoly is a form of market organization in which there are few cellars of a homogenous or differentiated product if there are only two sellers, we have a duopoly if the product is homogenous, we have a pure oligopoly, if the product is differentiated, we have a differentiated oligopoly.
So we can define oligopoly as that
“oligopoly is the form of market organization in which there are few sellers of a homogeneous or differentiated product”.
Oligopoly is the most prevalent form of market organization in the manufacturing sector of most nations some oligopolistic industries in India are automobiles, primary aluminum, steel, electrical equipment, glass, breakfast cereals, cigarettes some of these production like steel and aluminum are homogeneous, while others such as automobiles, soaps and detergents are differentiated. Oligopoly exists also when transportation corts limit the market area. For example, even though there are many cement producers in India, competition in limited to the few local producers in a particular area.
Sources of oligopoly:
The sources of oligopoly are generally the same as for monopoly. That is
(1) Economics of scale may operate over a sufficiently large range of outputs as to leave only a few firms supplying the entire market.
(2) Huge capital investments and specialized inputs are usually required to enter an oligopolistic industry like automobiles, aluminum, steel, and similar industries and this acts as an important natural barrier to entry.
(3) A few firms may own a patent for the exclusive right to produce a commodity or etc to use a particular process.
(4) Established firms may have a loyal following of customers based on product quality and service that new firms would find very difficult to match.
(5) A few firms may own or control the entire supply of a row material required in the production of the product and
(6) The Government may give a franchise to only a few firms to operate in the market.
The above are not only the sources of oligopoly but also represent the barriers to another firms entering the market in the long run.
So we can define oligopoly as that
“oligopoly is the form of market organization in which there are few sellers of a homogeneous or differentiated product”.
Oligopoly is the most prevalent form of market organization in the manufacturing sector of most nations some oligopolistic industries in India are automobiles, primary aluminum, steel, electrical equipment, glass, breakfast cereals, cigarettes some of these production like steel and aluminum are homogeneous, while others such as automobiles, soaps and detergents are differentiated. Oligopoly exists also when transportation corts limit the market area. For example, even though there are many cement producers in India, competition in limited to the few local producers in a particular area.
Sources of oligopoly:
The sources of oligopoly are generally the same as for monopoly. That is
(1) Economics of scale may operate over a sufficiently large range of outputs as to leave only a few firms supplying the entire market.
(2) Huge capital investments and specialized inputs are usually required to enter an oligopolistic industry like automobiles, aluminum, steel, and similar industries and this acts as an important natural barrier to entry.
(3) A few firms may own a patent for the exclusive right to produce a commodity or etc to use a particular process.
(4) Established firms may have a loyal following of customers based on product quality and service that new firms would find very difficult to match.
(5) A few firms may own or control the entire supply of a row material required in the production of the product and
(6) The Government may give a franchise to only a few firms to operate in the market.
The above are not only the sources of oligopoly but also represent the barriers to another firms entering the market in the long run.
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