Answer to Question #127946 in Microeconomics for Gerald

Question

The market for chicken restaurants, like KFC, Chicken Licken and Nandos, are said
to be within the category of monopolistic competition. Examine this market for
characteristics and behaviours that link them to this type of market structure

Answer 1

KFC, Chicken Licken, and Nandos firms and others like Subway, Wendy's, McDonald's, Taco John, Chipotle, in a broader sense, belong under monopolistic competition. The industry is fast foods or takes away foods.

For an industry to be in a monopolistic competition:

 

a.There must be many firms

b.The firms should offer differentiated but close substitutes.

c.The industry should be relatively easy to enter

d.Their prices should be reasonably close.

 

Since these characteristic applies to these firms, the market can be classified as

being of monopolistic competition. Some may take exception to this by claiming that the

industry is an oligopoly, perhaps because McDonald's and Burger King have a significant

share of the market. However, that is not quite precise since some of the others in conjunction also have a large share of the market.