What are the similarities and differences between oligopoly and monopolistically competitive market?

In a monopoly market, a single seller dominates the market and has the ultimate power to control the market prices and decisions. In this type of market, customers too have limited choices. On the other hand, in an oligopoly market, there are multiple sellers. As a result, there is a huge and never-ending competition to stand out.

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Differences Between Monopoly and Oligopoly

• A monopoly is a marketplace where a single seller of goods or services is the only price determinant in the marketDemand is an economic principle that explains the relationship between prices and customer behaviour as a result of price changes for products and services. Many elements in the economy influence demand for goods and services; these elements are known as determinants of demand, and they include the price of commodities, the price of substitutes, buyer's taste, and changes in buyer's income.read more. The seller is the sole provider of goods or services in that market. The seller has the power to influence the price of the goods, and there are a lot of buyers in need of that good.
• An oligopolyAn oligopoly in economics refers to a market structure comprising multiple big companies that dominate a particular sector through restrictive trade practices, such as collusion and market sharing. Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. read more can be defined as a market structure where few sellers (more than one and may be less than ten) sell products of the same category without much differentiation. The differentiation is only about the making of the product or its packaging. In this type of market, there is intense competition among the players. The buyers have the choice to choose the identical alternative of the product among the ones available on the market.

Monopoly vs Oligopoly Infographic

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Key Differences Between Monopoly and Oligopoly

• There is a single seller of goods in the market in a monopoly. In an oligopoly, there are few sellers in the market.
• There is no competition among the sellers in a monopoly as they are the only ones in the market. In contrast, there are few sellers in the market in an oligopoly, and there is intense competition.
• In an oligopoly, the customer has various product choices and is mainly driven by the price, customer preference, and brand loyalty. In contrast, the customer has no option or alternative to pick among the goods in a monopoly.
• In an oligopoly, the demand curveDemand Curve is a graphical representation of the relationship between the prices of goods and demand quantity and is usually inversely proportionate. That means higher the price, lower the demand. It determines the law of demand i.e. as the price increases, demand decreases keeping all other things equal.read moreof the market is kinked. While, in a monopoly, the demand curve is downward sloping.

• In the long run, in an oligopoly market structure, the seller ends up making the normal profitThe term "normal profit" is used when the profit is zero after accounting for both the implicit and explicit expenses, as well as the overall opportunity costs. It happens when all of the resources have been used to their full potential and cannot be put to better use.read more in the industry as any change in the price will be counter-set by the subsequent fall in the cost of the rival firm. Whereas, in the case of monopoly, there is a possibility that the seller can earn abnormal profitsProfit refers to the earnings that an individual or business takes home after all the costs are paid. In economics, the term is associated with monetary gains. read more in the long run.
• The price set by the monopoly is generally controlled or monitored by the government to protect the customers’ interests. For example, electricity is an example of a monopoly marketMonopoly is the “one-&-only” seller of a good or service in the market & it faces no competition from any other entity. Generally, it is controlled or monitored by the Government to safeguard the customers’ interests. read more where there is only one producer of goods. On the other hand, oligopoly is driven by private players in the market. For example, a brand of toothpaste has many closely related substitutes, which is an example of an oligopoly market.

Comparative Table

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