The Importance of Monopolistic Market Structure and Product Differentiation

Market Structure and Economic Institutions
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Market Structure and Economic Institutions
My organization (bakery shop) operates in a monopolistic competitive industry. Although there could be many bakeries in any given town, each slightly deals with differentiated products to the target consumers. Given the few bakeries in the area, the firm demands slightly higher prices for its products. The firm can command a significant market share and increase its product prices. The bakery provides the best pies and pasties within the town; thus, we can increase the prices since we know the customers can pay slightly more money for the superior products. The firm has an established brand and customer loyalty. Another important feature of a monopolistic structure is the low barrier to entering and exiting the bakery business. Firms compete within a monopolistic competition market structure by providing a slightly different product to their customers (Corp...