Marketing and the Theory of Monopolistic Competition

Abstract

THERE has been a growing interest among students of marketing in the possibility of using the theory of monopolistic competition as a theoretical tool for marketing problems. Some analytical frame of reference has been sorely needed in marketing; to too great an extent the field has been purely descriptive. The theory of monopolistic competition offers the hope of greater usefulness than the orthodox economic theory of pure competition. In particular, where monopoly elements are present there are negatively-inclined individual average revenue curves, permitting individual discretion in setting prices along those curves. A technique of price policy has been developed embracing the large field of trade-marked goods and wholesale and retail trade, where formerly economic theorists presumed that the market determined the prices for all sellers except those of the orthodox monopoly type. And yet the price technique indicated by writers on monopolistic competition does not appear to agree with the price policies described by marketing writers. It is the purpose of this paper to attempt to explain the discrepancy, and to evaluate the theory of monpolistic competition as a marketing tool.