A market situation when firms sell similar but not identical products is termed as

A market situation where firms sell similar but not identical products is defined as monopolistic competition [3]. This market structure is characterized by product differentiation, where sellers offer non-homogenous products that are close substitutes but not perfect ones [1]. Unlike perfect competition, where firms sell identical or homogenous products [1], monopolistic competition allows firms to have some degree of price-setting power because their products are unique in terms of branding, quality, or features [3]. This differentiation leads to non-price competition through advertising and marketing [1]. While imperfect competition is a broad category that includes monopolistic competition, oligopoly, and monopoly [1], the specific description of many firms selling 'similar but not identical' products is the textbook definition of monopolistic competition.

Sources

1. [1] https://en.wikipedia.org/wiki/Imperfect_competition
2. [3] Microeconomics (NCERT class XII 2025 ed.) > Chapter 4: The Theory of the Firm under Perfect Competition > 4.1 PERFECT COMPETITION: DEFINING FEATURES > p. 53