<Tr> <Td> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> </Td> </Tr> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> <P> Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes . In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms . In the presence of coercive government, monopolistic competition will fall into government - granted monopoly . Unlike perfect competition, the firm maintains spare capacity . Models of monopolistic competition are often used to model industries . Textbook examples of industries with market structures similar to monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in large cities . The "founding father" of the theory of monopolistic competition is Edward Hastings Chamberlin, who wrote a pioneering book on the subject, Theory of Monopolistic Competition (1933). Joan Robinson published a book The Economics of Imperfect Competition with a comparable theme of distinguishing perfect from imperfect competition . </P> <P> Monopolistically competitive markets have the following characteristics: </P>

Monopolistic competition is a type of market structure in which