Monopolistic Competition Research Paper Example | Topics and Well Written Essays - 750 words

Monopolistic Competition - Research Paper Example This similarity is obtained due to product differentiation portrayed either physically, by perception, or by support services. Most importantly, customers view these goods as similar since they serve the same purpose. Monopolistic competition advocates free entry into market and free exit. This enables new firms to come up with close substitutes thus enhancing competition. In a free market, a firm faces no restrictions from the government rules, financial start-up, or other considerable barriers. Additionally, free entry and exit in the market maintains profit maximization of a firm for a longer span of time. Selling price is a unique characteristic in monopolistic competition (Baumol, 2011). A firm is ever independent in decision-making. Each firm decides on commodity price and output. The seller sets the price of a good depending on circumstances. These variations of price arise due to product differentiation and other additional expenditures. Nike and Asics portray an example of two firms in the sneaker industry, which exhibits monopolistic competition. In order to ensure maximum competition, in the large monopolistic market, Nike and Asics need to emphasize on product differentiation to attract customers. The factors that need consideration during differentiation include style, appearance, quality, performance, close substitute of the goods (Arora, 2007). Since both firms produce similar product, there is need for a difference in the products that will attract the buyers. Different buyers have different perceptions on the kind of shoe to wear or the kind of shoe they feel comfortable with while wearing. The style of shoe tells a lot about an individual. Therefore, it is important for the two firms to first strategize and research on the style of shoe that most people prefer. This will enable the firm produce the shoe and ultimately sell it without much competition. Moreover, it is