Difference Between Oligopoly Market and Monopolistic Market

The major difference between oligopoly and monopolistic competition is the size and number of competing firms.

Oligopoly refers to large firms having a small number of competitors, while monopolistic competition is small firms with a large number of competitors. In other words, there exist many firms and many buyers in monopolistic firms, whereas in an oligopoly market, there exist a few big firms and many buyers.

Another difference between the two is that oligopoly has barriers to entry and exit in the market or industry, while monopolistic competition has freedom for entry and exit of industries.

An oligopoly can produce either a homogeneous product or a differentiated product, but in Monopolistic competition, only differentiated products are produced.

Moreover, there is full control of prices in an oligopoly with complete interdependence of all firms on each other. However, in monopolistic competition, each firm is independent and a competitor to other firms with narrow or no price control. Each decides its prices and quantities on its own to maximize its profits.

Monopolistic firms incur huge advertisement costs, whereas oligopolist firms either incur less or no advertisement costs.

Lastly, in an oligopolistic market, there exists a kinked demand curve, and the marginal revenue curve is also not continuous, and in monopolistic competition, the firm faces a continuous downward-sloping demand and marginal revenue curves.

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