NAME YASH VILAS

CHANDORKA
R
BATCH NAME M
BASIC OF MONOPOLISTIC
COMPETITION

• Monopolistic competition is a form of imperfect competition and

can be found in many real world market
• Monopolistic competition characterizes an industry in which many
firms offer products or services that are similar, but not perfect
substitutes. Barriers to entry and exit in a monopolistic competitive
industry are low, and the decisions of any one firm do not directly
affect those of its competitors.
 ASSUMPTIONS OF MONOPOLISTIC
COMPETITION
• In monopolistic competition, as with perfect competition,
we make a number of assumptions. However, do not get
muddled by the word monopolistic in the title. As a form of
competition, this is closest to perfect competition and
nowhere near the monopoly end of the scale. The reason
for the name is that in monopolistic competition we drop
the assumption from perfect competition of homogeneity
of products and so each firm can develop their own 'brand'
of product. This means that each firm has a 'monopoly'
over their brand, but there is still a large number of firms.
ASSUMPTIONS OF MONOPOLISTIC
COMPETITION
• Large number of firms - each firm has an insignificantly small share of the market.
• Independence - as a result of a large number of firms in the market, each firm is
unlikely to affect its rivals to any great extent. In making decisions it does not have to
think about how its rivals will react.
• Freedom of entry - any firm can set up business in this market.
• Product differentiation - each firm produces a different product or service from its
rivals. Therefore each firm faces a downward sloping demand curve. This is the key
difference from perfect competition. Product differentiation involves creating
differences between products, either real or imagined, in consumers minds and is likely
to involve various forms of non-price competition such as branding and advertising
 Price-output determination under
Monopolistic Competition
SHORT RUN PRIZE OUTPUT AND PROFIT
SHORT RUN PRIZE OUTPUT AND PROFIT

• Short-run equilibrium of the firm under monopolistic competition. The

firm maximizes its profits and produces a quantity where the firm's
marginal revenue (MR) is equal to its marginal cost (MC). The firm is
able to collect a price based on the average revenue (AR) curve. The
difference between the firm's average revenue and average cost,
multiplied by the quantity sold (Qs), gives the total profit.
LONG RUN PRIZE OUTPUT AND PROFIT
LONG RUN PRIZE OUTPUT AND PROFIT

• Long-run equilibrium of the firm under monopolistic competition. The

firm still produces where marginal cost and marginal revenue are equal;
however, the demand curve (MR and AR) has shifted as other firms
entered the market and increased competition. The firm no longer sells
its goods above average cost and can no longer claim an economic profit.
INEFFICIENCY OF MONOPOLISTIC
COMPETITION

• A monopolistically competitive firm might be said to be marginally

inefficient because the firm produces at an output where average
total cost is not a minimum. A monopolistically competitive market
is productively inefficient market structure because marginal cost is
less than price in the long run.
CASE STUDY : CAB INDUSTRY ( OLA)

• According to statistics, the market

volume of taxi services in India is more
than 2 million rides per day. The market
is expected to grow at a CAGR of 13.7
and reach around $14 billion by 2022.
The changing lifestyles of the urban
middle class and an increase in the
disposable income will drive the
market.
CAB INDUSTRY
HISTORY OF OLA
• Ola Cabs (stylised as OLΛ) is an 
Indian ridesharing company
• Ola Cabs was founded on 3 December 2010 as an
 offering services that include  online cab aggregator in Mumbai, and is now based in 
vehicle for hire and food delivery. Bangalore. As of 2019, the company has expanded to a
network of more than 15 lakh (1.5 million) drivers
The company is based in Bangalore across 250 cities.[5] In November 2014, Ola diversified
, Karnataka, India and was to incorporate auto rickshaws on a trial basis in 
Bangalore.[6] After the trial phase, Ola Auto expanded
developed by ANI Technologies to other cities like Delhi, Pune, Chennai and Hyderabad
Pvt. Ltd. As of October 2019, Ola  starting in December 2014.

was valued at about $6.5 billio

MARKET SHARES OF
COMPANIES
CHARGES RATE OF OLA
CABS
COMPARISON BETWEEN UBER
AND OLA
10 POINTS THAT WHY ONE SHOULD
TAKE OLA CABS RATHER THAN OTHERS

1. Despite being valued at just 5% of Uber (for whom India is

perhaps 5% of their business), Ola still manages to dominate the
Indian market. They need our support to maintain this position
against a foreign competitor that has a favourable exchange rate
and much more money to burn.
2 They operate in close to 100 cities, providing a convenient
commute to Lakhs of passengers every day. No other operator in
India has such a large network
3 They operate a number of services - Share, Micro, Mini, Prime,
Lux, Rentals, Outstation, Bike, Autos, Shuttle. Something for every
budget. The Ola Share Pass ensures customer stickiness, even if
they have to wait 15 minutes on average for the cab to arrive at the
pick up location.
4 Their prices are sometimes lower than that of Uber, and the cabs
are usually of similar quality
6 They have a good grip on technology, with an in-house payments wallet
that avoids friction at the time of booking the ride or settling the fare
7 The OTP system ensures that the driver and passengers are matched
correctly. This way, drivers will not lose money because of impersonation
or passengers getting into the wrong cab. This also makes it hard for them
to game the system with fraud rides.
8 Their Customer Care executives are human beings that one can talk to
and get the matter sorted immediately ('please cancel the trip and book
again' is a popular solution), instead of automated email bots that may not
understand the nature of the complaint.
9 . Thanks to product innovations, like Ola Play and Ola Select, they
provide an additional dimension to the best customers to make the rides
a little more enjoyable

10 They give a second chance to the disenfranchised section of

society, especially the Uber drivers who have been removed for
poor