Hillsborough Community College CH14 Monopolistic Competition Discussion

Note: The video has Closed Captioning. To activate it, start the video, mouse over the bottom of the video and click on the CC icon, then select from the menu.

This week we shall look at Monopolistic Competition. This is where you, as a consumer, spend most of your time. In Monopolistic Competition, there are many companies selling similar but not identical products. Put differently, the goods are close, but not perfect substitutes.

Because of the relative ease of substitution, companies often compete by advertising, services (for stores), brand names, brand loyalty and product differentiation more than by price. Thus, prices of competing products tend to be close, but not identical as they are in Perfect Competition.

Since this market is where you – as a consumer – spend most of your time and a lot of your money, this week you are going to look at this market in action in your daily life. When you go shopping this week, pay close attention to product prices and what information they tell you about how the products compete.

A grocery store is a good example. Look at the soda aisle and by viewing the prices and the product locations on the shelves, which products are close substitutes, sufficiently differentiated that they have brand loyalty (i.e., a higher price), etc. Do the same with canned vegetables. Or undertake the same observational experiment in another type of store you regularly frequent.

Assignment Summary:

1. Watch the video above and under the Week 4 Videos, watch all videos.
2. Then go to a store, as discussed above, and observe. Observation is a well-established method of real world research. It will probably be easier and perhaps more informative if you pick on one product line to observe and observe by brand name. In particular, look for:
   1. product prices,
   2. product packaging (design, colors, logos, etc.); and,
   3. product shelve placement relative to other similar products.
3. Based on what you observe can you identify:
   1. which products/brand names compete most closely with each other? Are they placed close to each other on the shelves or far apart?
   2. which products/brand names are aimed at cost conscious consumers? Where are these on the store shelves for grocery stores?
   3. which are aimed at higher end consumers? Where are these on the store shelves for grocery stores?
   4. which products/brand names have a narrower market and command brand loyalty? This one could be tricky to figure out.
4. Share what you find with the class on the discussion board.
   1. What do you think you have learned from this activity?
   2. What have you learned about monopolistic competition?
5. Post your views to the discussion board and refer to at least two different concepts from this week’s Chapters. Your illustration of concepts MUST include an explanation why you think they are relevant to the week’s topic using specific information from the articles, videos and other research that you have done.
6. Part 2: 150 word reply to each classmates
7. Miranda: One product that I believe has a narrower market and commands brand loyalty is soft drinks. Generally speaking, your Pepsi drinkers do not buy Coke if the store is out of Pepsi. Most people will stop somewhere else and buy the Coke or Pepsi or not buy any at all. Restaurants usually carry one or the other for their fountain drinks and not both. In this case, Coke products usually garner more brand loyalty than Pepsi products. In the grocery store these products are competing for the same consumers. They are placed close to each other on the display shelves and whatever new thing one product comes up with, the other usually has to follow to keep in competition. For example, Coke Zero and Pepsi Zero Sugar, Cherry Coke Pepsi Cherry. The products are nearly identical and compete for the same market space but Coca-Cola lovers and Pepsi lovers exhibit fierce brand loyalty.
8. Saphrianece: The products that I observed over this past weekend were tennis shoes. I recently went into “Champs Sports” to look at the different products and shoes they have. The products and brands that I have noticed that competed with each other were Nike and Jordan tennis shoes as well as there clothing products. These brands were placed closed to each other for both the clothes and shoes. The products were placed next to each other by row and column based on the style of the shoe and price. The products that are aimed at cost conscious consumers was the Nike brand and the product the product aimed at the higher end consumer was Jordan brand. Both of these products have a narrower market and are considered to have a command brand loyalty because some Jordan products are made through Nike and some Nike products are made through Jordan. For example, there are some Nike basketball shoes that have a Jordan logo because the player the shoes are made for and from may have a contract with Nike but feel as though Jordan shoes fit them best when playing. What I have learned from this activity is that even though the brand names are different, there is still some kind of comparison with both brand but also competition as well. Reason being is because the brand name is the only thing that makes the price difference.