What's the differences in pricing, product design, and advertising decision between a perfectly competitive market and a monopolistically competitive market? The question is in regards to corporate executive decisions.

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To elaborate on Pohnpei's answer, let's discuss the consequences of these types of markets on corporate executive decisions.

In a perfectly competitive marketplace, product is commoditized—no improvements they can make will let them upcharge for it. Additionally, buyers are always willing to pay a predetermined commodity rate—discounts and price-cutting can only represent a loss for the firm. And because of diminishing returns, each firm in the market has presumably performed profit-maximizing calculations on its production capacity. Thus, in order for a firm in a perfect competition to increase profits, it can do only one thing: find innovations that decrease the cost of production.

In a monopolistic market, executives face a much more complex set of choices. Their product is in competition with other similar products, but it is nevertheless unique. As a result, they must weigh costs and benefits of adding or removing features, increasing or decreasing advertising, and raising or decreasing prices. Every one of those is its own calculation in an interconnected web of profitability.

And one final aside: the closer you are to perfect competition, the easier it is to measure success. When cost of production is the only metric of corporate success, corporate success is readily measurable. In contrast, monopolistic competition can muddy the waters, making it difficult or impossible to tell if a poor financial outcome is the fault of the marketers, the designers, the quality assurance team, or something else.

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The difference is that these decisions essentially do not exist in a perfectly competitive market.  In perfect competition, the product is homogeneous.  Everyone's product is the same so there is no need for product design.  There is also no need and no use for advertising because there is nothing to differentiate one firm's product from another's.  The firm in perfect competition is a price taker.  It can only charge the market price so there are no pricing decisions.

In monopolistic competition, none of this is true.  Products are differentiated so decisions must be made about how to design them to be distinctive and how to advertise them.  Firms can set their own prices so there are decisions to be made there as well.  This is very different than the situation in perfect competition. 

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