THE ORIGIN OF THE SYLOS POSTULATE: MODIGLIANI’S AND SYLOS LABINI’S CONTRIBUTIONS TO OLIGOPOLY THEORY

Abstract

Paolo Sylos Labini’s Oligopoly Theory and Technical Progress (1957) is considered one of the major contributions to entry-prevention models, especially after Franco Modigliani’s formalization. Nonetheless, Modigliani neglected Sylos Labini’s aim when reviewing his work (1958), particularly his demonstration of the dynamic relation between industrial concentration and economic development. Modigliani addressed only Sylos Labini’s microeconomic analysis and the determination of the long-run equilibrium price and output, concentrating on the role played by firms’ anticipations. By doing so he shifted attention from Sylos Labini’s objective analysis to a subjective approach to the oligopoly problem. This paper discusses Sylos Labini’s and Modigliani’s differing approaches, derives the origin of the Sylos postulate, and sets Modigliani’s interpretation of Sylos Labini’s oligopoly theory in the context of his 1950s research into firms’ behavior under uncertainty.