Chamberlin's Theory of Monopolistic Competition

Chamberlin's Theory of Monopolistic Competition explains a market structure where many firms sell similar but slightly differentiated products, like different brands of toothpaste. Each company has some control over its prices because of product differences, but they face competition from others. This creates a situation where firms try to attract customers with unique features or branding, leading to a wide variety of products. Despite product differences, the market remains competitive, with firms continuously adjusting to attract buyers. This theory highlights the balance between competition and product diversity in many real-world markets.