A Note on Monopoly

Abstract

I. It is generally recognised that the development of the theory of imperfect competition is among the most important advances witnessed in economic theory during the last few years. Originally applied to the theory of value in the restricted sense of the term, it has been introduced into the theory of money (or output as a whole), into the theory of real and money wages, and it is being regarded as providing the clue to the secular stability of the distribution of the National Income. The purpose of the following paragraphs is not to deny the importance of these developments, nor to cast doubt upon the legitimacy of the extension of the theory of imperfect competition to the theory of money and distribution. It is, however, suggested that the present line of approach is not satisfactory, and, in particular, that with the extension of imperfect competition to the wider fields of theoretical and applied economics, a burden is placed on the theory which in its present form it is unable to bear. 2. The leading exponents of the theory of imperfect competition have admitted the limitations of their analysis,' and it has been suggested2 that in its simplest form (sloping demand curve, unique correlation between price and output, and disregard of reaction by other oligopolists) it is not to be found in real life. Nevertheless, the theory continues to be based very largely on the simple instance of sloping demand curve; more surprising, in its narrowest form it was adopted as the basis of the extension of the theory to wider fields.3 3. It is suggested that, apart from complications introduced by price discrimination, there can be distinguished