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Firms like McDonald’s and Wendy’s sell hamburgers, salads, and other products that are differentiated in nature. While numerous fast-food restaurants exist in most locations, the differentiated nature of the firms’ products permits them to charge prices that are in excess of marginal cost. Given these observations, is the fast-food industry most likely a perfectly competitive industry, a monopoly, monopolistically competitive, or an oligopoly? Use the causal view of structure, conduct, and performance to explain the roles of product differentiation in the industry, and explain how the feedback critique applies in this context.

There are two good arguments posted on whether the fast food industry is a monopolistically competitive market or a Sweezy oligopoly. A monopolistic competitive market has many firms and consumers. Sweezy oligopoly has a few large firms that dominate the field. Yes, indeed there a many fast food restaurants, but only a handful represent the majority of the national market. So there is a good argument for both cases. The next difference between the two would be whether these restaurants serve different products. I think many are in agreement that they do. This would then fit them into either market category. Lastly, we look at whether or not the firm has any power to change the price of the product and what is the response of the other firms when they do. The major food corporations do have control over what they charge for their product but I don’t believe that in the fast food industry, that a company will only lower prices in response to it’s competitors. I believe they will also increase price when needed. This then negates the idea of the fast food industry being an example of a Sweezy Oligopoly and leans more to the theory that fast food chains are monopolistically competitive.