Perfect competition and monopoly are the two extremes in the range of market structures. Most markets fall into two other categories: monopolistic competition and oligopoly. Monopolistic competition is a market in which many companies sell products that are similar but not identical. For example, jeans can differ in brand, style, and color. Ice cream differs in taste and flavors. These markets are called monopolistic competition because each firm has a kind of monopoly over its own particular product. Monopolistic competition exists in industries where there are low barriers to entry.

     Firms that are monopolistically competitive have slight control over their prices, because they offer products that are slightly different from any other company’s. They also use nonprice competition, or competition through ways other than lower prices, to compete. They may offer new colors, textures, or tastes in their products. They may also try to find the best location for their services.      

     Oligopoly is a market dominated by a few large firms. It can form when significant barriers to entry exist. Examples of oligopolies in the United States include air travel, cola, breakfast cereals and household appliances. Oligopolistic firms sometimes use illegal practices to set prices or to reduce competition. They may engage in price fixing, an agreement among firms to sell at the same or very similar prices. Price fixing is illegal in the United States and can lead to heavy penalties.