Monopolistic Competition

P. J. Curwen

Chapter Chapter 5 in The Theory of the Firm, 1976, pp 31-38 from Palgrave Macmillan

Abstract: Abstract The model of monopolistic competition retains many of the assumptions of the model of perfect competition, but differs from it in one major respect. Whereas the industry is assumed to consist of a large number of small firms each of which is run by an entrepreneur who pursues the goal of profit maximisation using marginal analysis under conditions of perfect knowledge, and whereas there is freedom of entry into, and exit out of, the industry, each firm can no longer be treated as a price-taker. This stems from the fact that each firm produces a product which is regarded by consumers as being in some meaningful way different from the products made by all other producers. Such differences between products may be either real or imagined, but this distinction is unimportant provided that consumers treat the products of different firms as being less than perfect substitutes for one another.

Keywords: Demand Curve; Cost Curve; Traditional Theory; Excess Capacity; Marginal Revenue (search for similar items in EconPapers)
Date: 1976
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-15645-0_5

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DOI: 10.1007/978-1-349-15645-0_5

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