Famous Figures and Diagrams in Economics
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Famous Figures and Diagrams in Economics

Edited by Mark Blaug and Peter Lloyd

This is a unique account of the role played by 58 figures and diagrams commonly used in economic theory. These cover a large part of mainstream economic analysis, both microeconomics and macroeconomics and also general equilibrium theory.
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Chapter 18: Monopolistic Competition

Andrew Skinner

Extract

18. Monopolistic competition Andrew Skinner INTRODUCTION Monopolistic competition was part of the intellectual debate of the time. Even if we leave Joan Robinson aside, the debate was an old one. Pigou, as Chamberlin points out, had already used the term. Marshall himself was aware of pricing policy in the light of ‘sources of possible competition’, noting that even where ‘large and strong’ the monopolist will not make full use of his power ‘but will adjust his prices to obtaining a firm hold on the market before he can be caught by competitive supply’ (1920, pp. 396–97). The reference to competitive supply is interesting, believing as Marshall did that: Though monopoly and free competition are ideally wide apart; yet in practice they shade into one another by imperceptible degrees; that there is an element of monopoly in nearly all-competitive business; and that nearly all monopolies that are of any practical importance in the present age, hold much of their power by an uncertain tenure; so that they would lose it ere long, if they ignored the possibilities of competition, direct and indirect (1920, p. 397). Marshall’s concern with realism finds an echo in Chamberlin’s work. Chamberlin undoubtedly recognised the need for empirical research, so that Georgescu-Roegen was surely correct in emphasising his concern with ‘the actual’ (in Kuenne, 1967, p. 38). Chamberlin’s concern with the actual had an interesting consequence. This relates to the introduction of the curve of marginal revenue. Something of the flavour of the period is to...

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