In a monopolistically competitive market structure how can I specifically differentiate my restaurant from others in the market?
Answers
The first model of an imperfectly competitive industry that we shall investigate has conditions quite similar to those of perfect competition. The model of monopolistic competition assumes a large number of firms. It also assumes easy entry and exit. This model differs from the model of perfect competition in one key respect: it assumes that the goods and services produced by firms are differentiated. This differentiation may occur by virtue of advertising, convenience of location, product quality, reputation of the seller, or other factors. Product differentiation gives firms producing a particular product some degree of price-setting or monopoly power. However, because of the availability of close substitutes, the price-setting power of monopolistically competitive firms is quite limited. Monopolistic competition is a model characterized by many firms producing similar but differentiated products in a market with easy entry and exit.