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Competition

sidered to be the closest example in today’s economy. The they have the financial ability to make the needed invest-
corn grown by one farmer is virtually identical to the corn ment. The type of products sold in an oligopoly can be
grown by another farmer, and the current market controls similar or different, and each seller has some control over
the price the farmers receive for their crops. Perfect com- price. Examples of oligopolies include the automobile, air-
petition follows the law of supply and demand. If the plane, and steel industries.
price of a product is high, consumers will demand less of
the product while the suppliers will want to supply more. Monopoly. A monopoly exists when a single seller con-
If the price of a product is low, the consumers will
trols the supply of a good or service and prevents other
demand more of the product, but the suppliers will be
businesses from entering the field. Being the only provider
unwilling to sell much at such a low price. The equilib- of a certain good or service gives the seller considerable
rium point is where the supply and the demand meet and
control over price. Monopolies are prohibited by law in
determine the market price. For example, if the going the United States; however, government-regulated
market price for wheat is $5 a bushel and a farmer tries to
monopolies do exist in some business areas because of the
sell wheat for $6 a bushel, no one will buy because they
huge up-front investment that must be made in order to
can get it for $5 a bushel from someone else. On the other
hand, if a farmer offers to sell wheat for $4 a bushel, the provide some types of services. Examples of monopolies in
the United States are public utility companies that provide
crop will sell, but the farmer has lost money because the
crop is worth $5 a bushel on the open market. services and/or products such as gas, water, and/or elec-
tricity.
Monopolistic Competition. Monopolistic competition
exists when a large number of sellers produce a product or BIBLIOGRAPHY
service that is perceived by consumers as being different Boone, Louis E., and Kurtz, David L. (2006). Contemporary
from that of a competitor but is actually quite similar. Business. Mason, OH: Thomson/South-Western.
This perception of difference is the result of product dif- Bounds, Gregory M., and Lamb, Charles W., Jr. (1998).
ferentiation, which is the key to success in a monopolistic Business. Cincinnati, OH: South-Western College Publishing.
industry. Products can be differentiated based on price, Burnett, John, and Moriarty, Sandra E. (1998) Introduction to
quality, image, or some other feature, depending on the Marketing Communication: An Integrated Approach. Upper
product. For example, there are many different brands of Saddle River, NJ: Prentice Hall.
bath soap on the market today. Each brand of soap is sim- Clancy, Kevin J., and Shulman, Robert S. (1994). Marketing
ilar because it is designed to get the user clean; however, Myths That Are Killing Business: The Cure for Death Wish
each soap product tries to differentiate itself from the Marketing. New York: McGraw-Hill.
competition to attract consumers. One soap might claim French, Wendell L. (1998). Human Resources Management (5th
that it leaves you with soft skin, while another soap might ed.). Boston: Houghton Mifflin Co.
claim that it has a clean, fresh scent. Each participant in Goldzimer, Linda Silverman, and Beckmann, Gregory, L.
this market structure has some control over pricing, which (1989). “I’m First”: Your Customer’s Message to You. New York:
Rawson Associates.
means it can alter the selling price as long as consumers
are still willing to buy its product at the new price. If one Madura, Jeff (2004). Introduction to Business. Belmont, CA:
product costs twice as much as similar products on the Thomson/South-Western.
market, chances are most consumers will avoid buying the Moore, James F. (1996). The Death of Competition: Leadership
more expensive product and buy the competitors’ prod- and Strategy in the Age of Business Ecosystems. New York:
HarperBusiness.
ucts instead. There can be few or many competitors (typ-
ically many) in a monopolistic industry, and it is Nickels, William G., McHugh, James M., and McHugh, Susan
somewhat difficult to enter or leave such an industry. M. (2005). Understanding Business (7th ed.). Boston:
McGraw-Hill/Irwin.
Monopolistic products are typically found in retailing
businesses. Some examples of monopolistic products Pfeffer, Jeffery (1994). Competitive Advantage Through People.
Boston, MA: Harvard Business School Press.
and/or services are shampoo products, extermination serv-
ices, oil changes, toothpaste, and fast-food restaurants. Pride, William M., Hughes, Robert J., and Kapoor, Jack R.
(2002). Business (7th ed.). Boston: Houghton Mifflin.
Zikmund, William G., Middlemist, R. Dennis, and Middlemist,
Oligopoly. An oligopoly exists when there are few sellers
Melanie R. (1995). Business: The American Challenge for
in a certain industry. This occurs because a large invest- Global Competitiveness. Homewood, IL: Austen Press.
ment is required to enter the industry, which makes it dif-
ficult to enter or leave. The businesses involved in an
oligopoly type of industry are typically very large because Marcy Satterwhite

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