Oligopoly market structure versus monopolistic competition

Oligopoly market structure versus monopolistic competition
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Oligopolistic and monopolistic competition fall under imperfect competition, and are between the extremes of perfect competition and monopoly, but there are also differences in their market structures. Even though, the differences between the two may not be clear cut, oligopolies tend to have less number of firms that may run as a cartel, while monopolistic competition typically have more firms. The small numbers of oligopolistic firms in an industry use barriers of entry to limit competition, but there are less barriers in the market among monopolistic competition. This paper explores how the two market structures differ in terms of the expected market behavior.
Even though, in the oligopoly market structure there are few large firms, they account for a big percentage of the total output in the industry. Hence, these firms are dominant in the market through concentrated market shares. On the other hand, firms under monopolistic competition have a small market share as the number of firms is high (Taylor, 2008). The increase in the number of firms means that firms seem to acquire features of monopolistic competition market structure; they also have fewer characteristics of an oligopolistic market structure and vice versa.
The barriers to entry and exit for oligopolistic firms lead to abnormal profits in the short run as there is limited completion and firms collude to set the prices (Boyes & Melvin, 2009). In addition, in the long run the firms are able to maintain super profits as entry barriers ensure there is dominance of the few large firms. The barriers dissuade other firms from venturing into the industry even when the profits seem impressive, which leads maintenance of abnormal profits. There is elimination of excess profits under monopolistic competiti...