Economics Dictionary of ArgumentsHome
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| Monopolistic competition: Monopolistic competition in economics is a market structure where many firms sell similar but differentiated products. Each firm has some control over pricing due to product differentiation, but there is significant competition. Barriers to entry are low, allowing new firms to enter the market. Examples include restaurants, clothing brands, and electronics, where products are not identical but serve similar functions. See also Monopolies, Monopoly price, Oligopolies, Competition._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Roy Harrod on Monopolistic Competition - Dictionary of Arguments
Rothbard III 732 Monopolistic competition/Harrod, Roy/Rothbard: (…) the monopolistic-competition theorists have by no means solved their problem of surplus factors. >Monopolistic competition/Rothbard. But, aside from this point, there are more diffculties in the theory, and Sir Roy Harrod, himself one of its originators, is the only one to have seized the essence of the remaining central diffculty. As Harrod says: „If the entrepreneur foresees the trend of events, which will in due course limit his profitable output to x - y units, Why not plan to have a plant that will produce x- y units most cheaply, rather than encumber himself with excess capacity? To plan a plant for producing x units, while knowing that it will only be possible to maintain an output of x— y units, is surely to suffer from schizophrenia.“ And yet, asserts Harrod puzzledly, the "accepted doctrine" apparently deems it "impossible to be an entrepreneur and not suffer from schizophrenia.“(1) Rothbard: In short, the theory assumes that, in the long run, a firm having to produce at F will yet construct a plant with minimum costs at point E, here is a patent contradiction with reality. What is wrong? RothbardVsHarrod: Harrod's own answer is an excellent and novel discussion of the difference between long-run and short-run demand curves, with the "long run" always being a factor in entrepreneurial planning, but he does not precisely answer this question. VsMonopolistic competition: The paradox becomes "curiouser and curiouser" when we fully realize that it all hinges on a mathematical technicality. The reason Why a firm can never produce at an optimum cost point is that (a) it must produce at a tangent of demand and average-cost curves in equilibrium, and (b) if the demand curve is falling, it follows that it can be tangent to a U-shaped cost curve only at some point higher than, and to the left of, the trough point. >Overproduction. 1. Harrod, Economic Essays, p. 149._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Harrod I Roy Harrod International Economics Cambridge 1958 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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