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econ434notes28 - History of Economic Doctrines Lecture 28...

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Unformatted text preview: History of Economic Doctrines Lecture 28 Market Structures: From Perfect to Imperfect Competition Edwin H. Chamberlin (1899-1967) Chamberlin’s Harvard Ph.D. dissertation, The Theory of Monopolistic Competition , profoundly altered economic theory, an extremely rare feat for doctoral dissertations. Prior to this work (and that of Joan Robinson, The Economics of Imperfect Competititon ) most mainstream economists had largely ignored the vast middle ground between the extremes of pure competition and pure monopoly. They instead focused on refining the theory of pure competition, which assumes many sellers of homogeneous products. The theories of Chamberlin and Robinson combined to underpin numerous studies of industrial markets from the 1940s into the 1960s and they provided the foundations for an expanded approach to industrial organization that emphasized structure-conduct and performance [SCP]. S C P Paradigm (Structure Conduct Performance) S: how many firms C: pricing, output P: efficiency, inefficiency According to the S-C-P line of reasoning, the structure of an industry (for example, the number of competitors) is assumed to determine conduct (the behavior of the industry’s firms) in a fairly mechanistic fashion and the conduct of these firms yields efficient or inefficient performance from the vantage of the rest of society. Chamberlin believed that firms engage in both price competition and non-price competition Chamberlin thought that advertising and marketing gimmicks were used to differentiate essentially identical products, thereby decreasing the elastically of market demand for a specific brand According to Chamberlin, monopolistically competitive firms cannot realize economic profits in the long run because these markets are characterized by freedom of entry and exit The Structure Conduct—Performance Approach to Industrial Organization ___*___________________*______________________*__________________________*___...
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This note was uploaded on 01/12/2010 for the course ECON 434 taught by Professor Byrns during the Spring '09 term at UNC.

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econ434notes28 - History of Economic Doctrines Lecture 28...

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