How do purely competitive markets compare to monopolistically competitive markets?

The difference between purely competitive markets and monopolistically competitive markets is that producers sell identical products in purely competitive markets, but producers sell, similar, but differentiated, products in monopolistically competitive markets.

Explanation:

Monopolistic competition is a common form of market organization. It differs from perfect competition in that manufacturers strive to make their products different from those of their competitors.

Monopolistic markets thus differ from perfect competition only in terms of heterogeneity. This gives companies market power: they can increase the price by relying on consumer loyalty to the brand.

Monopolistic markets are inefficient, but market regulation is generally so difficult that the ineffectiveness of monopolistic competition is less than the cost of regulation, as the administration should monitor all companies that sell heterogeneous products.

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