The Theory of Imperfect Competition Monopolistic competition A special case of oligopoly Two key assumptions are made to get around the problem of interdependence Each firm is assumed to be able to differentiate its product from its rivals Each firm is assumed to take the prices charged by its rivals as given Copyright C 2003 Pearson Education, Inc Slide 6-16Copyright © 2003 Pearson Education, Inc. Slide 6-16 • Monopolistic competition – A special case of oligopoly – Two key assumptions are made to get around the problem of interdependence: – Each firm is assumed to be able to differentiate its product from its rivals. – Each firm is assumed to take the prices charged by its rivals as given. The Theory of Imperfect Competition