Features of monopolistic competition?

A large number of sellers: In a market with monopolistic competition, there are a large number of sellers who have a small share of the market. Product differentiation: In a monopolistic competition, all brands try to create product differentiation to add an element of monopoly over the competing products. This ensures that the product offered by the brand does not have a perfect substitute. Therefore, the manufacturer can raise the price of the product without having to worry about losing all its customers to other brands. However, in such a market, while all brands are not perfect substitutes, they are close substitutes for each other. Hence, the seller might lose at least some customers to his competitors. Freedom of entry or exit: Like in perfect competition, firms can enter and exit the market freely. Non-price competition: In a monopolistic competition, sellers compete on factors other than price. These factors include aggressive advertising, product development. better distribution, after sale services etc. Sellers don’t cut the price of their products but incur high costs for the promotion of their goods.

Three features of monopolistic competition are as follows:
(i) Large number of buyers and sellers As under perfect competition, in this form also, there are a large number of buyers and sellers. Also, the size of each firm is small. Each firm has a limited share of the market.
(ii) Product differentiation It is a distinct feature of monopolistic competition. A product is often differentiated by way of trademarks and brand
. names. The differentiated products are close substitutes of each other, like Colgate and closeup toothpaste. Because of product differentiation, each firm can decide its price policy independently, so that each firm has a partial control over price of its product.
(iii) Selling cost Each firm has to incur selling costs (expenditure on advertisement, etc) to promote its sales. This is because there are a large number of close substitutes available in the market.