In monopolistic competition, a large number of suppliers offer products and services that are highly differentiated. As a result of this high degree of differentiation, firms are granted more freedom in changing the prices of products and manipulating those numbers to drive profits. This contrasts with pure monopoly, which is heavily regulated by the government and is therefore given less freedom
. to charge higher prices. Firms operating in this type of economy enjoy a number of key advantages over oligopolies and pure monopolies. Foremost, each firm is at liberty to set its own prices as high as is reasonable without interference from regulatory agencies; in turn, this increases the amount of profit that the firm can potentially earn. If the producer's product offering requires significantly high research and development costs, this ability to set higher prices makes it easier to recoup these costs. Monopolistic competition also offers firms the opportunity to capitalize on differentiation by adding value to the product offering. The ability to adopt different price points brings in additional revenue, which then allows the firm to invest that money back into the enhancement and development of their current and prospective product offerings. By returning that money to the firm, it can ensure that its products are of higher quality, which ultimately builds trust and strengthens the brand's identity. The improved quality of the products makes it easier for firms to win and retain the most valuable customers. Smaller businesses benefit from monopolistic competition because this type of economy has very low barriers to entry. Therefore, any company with an appealing, functional product or service offering has the potential to enter the market for a relatively low price, then differentiate itself based on the quality of its products. Monopolistic competition also benefits consumers because it encourages firms to continuously improve upon products. Therefore, consumers have access to a wider range of differentiated goods. http://www.econ.uiuc.edu/~seppala/econ102/lect15.pdf or http://www.justice.gov/atr/public/reports/236681_chapter2.htm
