Product Differentiation and Demand Elasticity

Richard L. Carson ()
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Richard L. Carson: Department of Economics, Carleton University, https://carleton.ca/economics/faculty-and-staff/other-faculty/without-fgpa-supervisory-status/#carson

No 18-12, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: This paper argues that product differentiation is compatible with perfect competition under free entry and exit and small firm size relative to size of market. Despite Chamberlin’s view, monopolistic competitors are price takers, even though each firm’s product has no perfect substitute. There is a difference between perfect competition with product homogeneity and perfect competition with differentiated products, however. Advertising can pay off with differentiated products because products have separate identities—and price depends on quality—even though firms are price takers for any given quality. A differentiated oligopoly may resemble monopolistic competition a la Chamberlin in some ways.

Keywords: Monopolistic Competition; Perfect Competition; Product Differentiation (search for similar items in EconPapers)
JEL-codes: D41 D43 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2018-10-17
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-mkt and nep-ore
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Published: Carleton Economic Papers

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Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:18-12

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