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Firstly, we understand what is price competition and Non price competition.

Price competition: Price competition is a situation in which various firms compete among themselves only on the basis of price of their products (quality and selling cost remaining constant).

Non price competition: Non price competition is a situation in which various firms compete among themselves on the basis of quality of the product or selling costs (price remaining constant). Means, under monopolistic competition, a firm has some control over the price and therefore, to earn maximum profits, the firm has to decide its pricing policy, whether, it should increase or increase the price or whether it should keep the price constant. Thus, when an individual firm enters into competition with the rival firms by changing the price of its product known as price competition.

In other words, Under monopolistic competition, a firm in order to maximise its profits, may not like to enter into price competition with its rival firms, instead it may prefer to bring about an improvement in the quality of its product or incur selling costs to boost up the sales of its product and thus offer competition to its rival firms. Thus, when an individual firm competes with the rival firms not by changing the price of product but by improving the quality of its product or by incurring selling costs, such competition is known as non-price competition.

For some groups of people in society, price competition is more beneficial than non-price competition, while for some other groups of people, non-price competition is more beneficial than price-competition.

From the point of view of buyers, price competition among the sellers is more beneficial because it results into price reduction which leads to an improvement in the real income of the buyers. On the other side, non-price competition is confined to advertisement, it may be regarded as an economic waste for two reasons. First, most of persuasive advertisement is deceptive. It misleads the buyers, their money gets spent in wrong directions under the influence of advertisement. Secondly, resources used up in advertisement could have been used in production and standard of living of the people could be raised.

If we look from the point of view of the products and sellers, non-price competition is better than price competition. Means, first advertisement can be discontinued if it does not produce results, it is not advisable to raise price again once it has been reduced.

Secondly, price-cutting is regarded as unethical in business. As against this, advertisement and product improvement means of sales promotion are never opposed by the rivals. Thirdly, sales may increase as the result of price reduction. Gain cannot be permanent. The rivals can at any time snatch away the business by reducing prices of their products to a larger extent. As against this, advertisement and product improvement can bring permanent benefit.

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