During the last few years the smartphone market has been one of the most profitable markets in all countries. “Smartphones are mobile phones which include functions similar to those found on personal computers” (smartphone, 2010). In the current market we can find smartphones – products which are very similar but not exactly the same. For example Apple, Blackberry and Nokia are three firms that produce similar smartphones but each one of these brands chooses to install different applications in their phones. This is the reason why the market structure that refers to smartphones is monopolistic competition. In February 2010 O2, announced that it had sold 2 million Apple iPhones. As we said before IPhone is included in the smartphone market, therefore in monopolistic competition. Monopolistic competition is a market structure in which many firms sell products that are similar but not identical (Mankiw G et al, 2010, p.355). In the smartphone market we can find many firms producing non-homogeneous products. For instance Apple produced iPhone; BlackBerry’s latest model is Blackberry Torch and Nokia with N8. All of these firms are producing smartphones and they are competing with each other. Each smartphone is unique with its own applications so the producers in the market are not price takers but are price makers. This means that they can choose the price with which they will charge products.

Statistically speaking, Apple Nokia and Blackberry are nowadays the top firms in the smartphone industry. But also from the Global Smartphone Market Share chart we can see that other firms have a huge amount of incomes from their products too. But why do all of these firms choose to enter a market structure of monopolistic competition? First of all in the monopolistic competition there are many sellers. Many firms are competing with each other for the same amount of