A monopolistically competitive market has characteristics that are similar to a monopoly. However, there is always more than one firm in the industry and it is not possible for any of them to be an absolute price setter. The distinguishing feature of this type of market is that firms within the industry possess some degree of product differentiation from one another which prevents them from competing solely on price.
It’s hard to say what distinguishes a monopolistically competitive market from other types such as oligopoly or perfect competition because they share many similarities; however, most economists believe that monopolistic competition has fewer barriers to entry than oligopoly or perfect competition do since it does not require large investments by new entrants into the marketplace.
Monopolistically competitive markets are characterized by some degree of product differentiation. Firms within the industry possess some degree of product differentiation from one another which prevents them from competing solely on price.
This means that there is no absolute price setter in this type of market and each firm can change its pricing with only small impacts on competitors. Generally, firms will compete more aggressively.