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25. Theories of imperfect competition: views of A. Pigou, E. Chamberlin, D. Robinson
The name and model of this type of market arose after the publication in 1927 of the book of the same name by E. Chamberlin. Over time, the author himself came to the conclusion that all types of markets that are between perfect competition and monopoly contain elements of both, and therefore can be combined into a broad class of monopolistic (imperfect) competition markets. The classification presented by the author is the most exhaustive:
1) pure competition;
2) monopolistic competition;
3) pure monopoly.
The main feature of the market of monopolistic competition - product differentiation. The subjects of the market are numerous, each of them occupies an insignificant share in the market, they have some power due to product differentiation and segmentation of the corresponding product market.
resemblance to the perfect - many sellers and buyers, significant freedom to enter the market.
difference from perfect - heterogeneity, differentiation of products.
Difference from an oligopolistic market - enterprises in the market of monopolistic competition are not interconnected if their market shares are comparable in size, the behavior is closer to the behavior of perfectly competitive enterprises.
The model of imperfect competition "dominant company-outsider" - there are one or two enterprises in the market that occupy a dominant position, and a significant number of outsider enterprises with small market share. This system of relations is characterized by a model approaching a monopoly market, and outsider competition is characterized by a model of perfect competition or the first type of monopolistic competition.
Demand for a company's products in the market "dominant company - outsider" is not perfectly elastic, because buyers committed to the brand will purchase the product, even if its price is slightly higher than that of peers.
The essential determinant of market power is not pricing policy, but the degree of customer loyalty to a particular brand of product.
An indicator of market power is the price elasticity of demand for a company's product.
In the markets of monopolistic competition, the main factor in the competitiveness of a product is the uniqueness of the combination of consumer properties in the eyes of buyers. Price competition fades into the background, giving way to non-price competition.
Non-price competition tools: advertising campaigns, service competition, warranty and post-warranty service, assortment competition, location, etc.
Author: Ilyina V.N.
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