Theory Of Monopolistic Competition Research Articles

Antitrust Laws and the Future of Market Competition

Purpose: The general objective of the study was to investigate antitrust laws and the future of market competition. Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library. Findings: The findings reveal that there exists a contextual and methodological gap relating to antitrust laws and the future of market competition. Preliminary empirical review revealed that while existing antitrust frameworks had been instrumental in promoting competition and preventing monopolistic practices, they faced significant challenges in the digital age. The rapid evolution of technology and the rise of digital platforms had created new competitive dynamics that traditional antitrust laws struggled to address. The dominance of a few tech giants led to market concentration, reducing the scope for competition and innovation. The study highlighted the inadequacies of current antitrust enforcement in dealing with digital platforms, data control, and network effects. Additionally, it emphasized the need for international cooperation and a balanced approach to antitrust enforcement that considered both competition and innovation to ensure that the benefits of the digital economy were widely shared. Unique Contribution to Theory, Practice and Policy: The Structure-Conduct-Performance (SCP) Paradigm, Contestable Market Theory and Innovation and Monopolistic Competition Theory may be used to anchor future studies on antitrust laws and the future of market competition. The study recommended updating theoretical frameworks to include factors like data control and network effects, and adopting more flexible and adaptive approaches in antitrust enforcement. It advocated for the creation of specialized regulatory units focused on digital markets, equipped with the necessary resources and expertise. The study also highlighted the importance of international cooperation in antitrust enforcement to address cross-border anti-competitive practices effectively. Furthermore, it suggested continuous dialogue with industry stakeholders to develop more informed policies and emphasized the role of consumer education in promoting competitive markets. These recommendations aimed to enhance antitrust laws and ensure robust market competition in the digital age.

A Theory of Monopolistic Competition with Horizontally Heterogeneous Consumers

Our novel approach to modeling monopolistic competition with heterogeneous firms and consumers involves spatial product differentiation, in either a geographical space or a space of characteristics. In addition to price, each firm chooses location in space. We formulate conditions for positive sorting—more-productive firms serve larger market segments and face tougher competition—and for existence and uniqueness of equilibrium. To quantify the role of sorting, we calibrate the model using haircut market data and perform counterfactual analysis. Inequality in gains among consumers caused by positive market shocks can be substantial: gains for consumers at more-populated locations are three to four times higher. (JEL D11, D24, D43, L13, L84)

A Theory of Monopolistic Competition with Horizontally Heterogeneous Consumers

Our novel approach to modeling monopolistic competition with heterogeneous consumers involves a space of characteristics of a differentiated good (consumers' ideal points), alike Hotelling (1929). Firms have heterogeneous costs a la Melitz (2003). In addition to price setting, each firm also chooses its optimal location/niche in this space. We formulate conditions for positive sorting: more efficient firms serve larger market segments and face tougher competition in the equilibrium. Our framework entails rich equilibrium patterns displaying non-monotonic markups, high in the most and least populated niches, and the unequal gains from trade across different consumers.

Wine quality and pricing in the global wine export market: the case of Chilean wines

ABSTRACT This paper hypothesizes that, from 1985 to 1999, Chilean export wine producers achieved significant quality improvements, which led to successful product differentiation in the global export market. Concomitantly – as the monopolistic competition theory predicts – they increased their wine prices, which represent the value wine consumers attach to the wine attributes (including the quality). Using the wine rating score as an approximation of quality, the paper tests this hypothesis using the nonparametric Wilcoxon rank-sum test. The results strongly support the hypothesis.

СУЩНОСТЬ ПРИБЫЛИ С АСПЕКТА РАЗЛИЧНЫХ ТИПОВ КОНКУРЕНЦИИ

The paper presents different points of scientists-economists view regarding the essence of profit in the conditions of competition’s various types. The theory of the profit essence from the aspect of The Theory of Monopolistic Competition by E. Chamberlin is considered. The author came to the conclusion that the modern Western theory of profit is characterized by electivity, the presence of very different ideas about its economic content. Integrity is noted only in relation to the interpretation of the social essence of profit - in the denial of its exploitative nature and the recognition of its legitimate, “natural” form of income.

Gebrakan dan Penganekaragaman: Budaya Persaingan dalam Pertumbuhan Seni Pertunjukan Rakyat di Boyolali Jawa Tengah

This study aims to reveal and explain the cultural practice of competition in the growth of folk performing arts in Boyolali through the monopolistic competition theory approach of Edward Hastings Chamberlin, which has been adapted and developed critically with ethnographic research methods. This research produces findings in the form of a cultural pattern of competition that occurs indirectly among folk performing arts communities in Boyolali. Its characteristics can be recognized by the pattern of development and diversification of works of art between communities which is carried out by adding and producing forms of art that are distinguished from one another. This pattern is built through the process and the result of creativity from the practice of developing, creating, and/or adopting art forms based on the intention to create and present a gebrakan. On the other hand, this process is also part of the diversification process carried out as a strategy to strengthen the community’s positioning in facing market competition. The patterns and strategies developed in it have had a positive impact on the growth of folk performing arts which are increasingly diverse, so that there are many choices of competing art forms that can be chosen to be seen or ordered to be performed.

An Integration of Neoclassical Growth Theory and Economic Structural Change with Monopolistic Competition Theory

Wealth accumulation is a deterministic factor mechanism of national economic growth. Neoclassical growth theory is basically concerned with capital and wealth accumulation in perfectly competitive market. Global markets are characterized by a great variety of markets. Nevertheless, there only a few rigorous models of wealth accumulation with other types of markets within neoclassical growth framework. This study attempts to contribute literature of economic growth by introducing monopolistic competition and monopoly into neoclassical growth theory. The model is based on a few well-established economic theories. The model is constructed within framework of the Solow-Uzawa two-sector neoclassical growth model. The description of to monopolistic competition is influenced by the Dixit-Stiglitz model of monopolistic competition. The modelling of monopoly is based on monopoly theory. We model behavior of the household with Zhang’s utility function and concepts of current income and disposable income. The unique contribution of this research is to integrate these theories in a comprehensive framework. We construct the basic model and then analyze properties of the model. The existence of a unique equilibrium point is identified by simulation. The effects of changes in some parameters comparative static analyses in some parameters.

Does market power explain margins in dual banking? Evidence from panel quantile regression

AbstractThis paper examines whether banks with greater market power have more control over the net interest margin. To this end, we employ panel quantile regression (QR) to a sample of Islamic and conventional banks from 14 dual banking countries during 2005–2018. Our empirical findings show that greater market power in a dual banking system results in a higher net interest margin, which is in line with the mainstream theory of monopolistic competition. After introducing the Islamic interaction dummy in the model, we find that in the case of Islamic banks the result is significant only for higher quantiles of bank margins. This study also has some policy implications, namely that the concentration of market power can be countered by developing a competitive environment among the banks to have competitive bank margins. We further suggest that to get a higher profit margin, Islamic banks need to be more competitive and more efficient while deciding the profit margins.

Monopolistic Competition, Optimum Product Diversity, and International Trade - the Role of Factor Endowment and Factor Intensities

In this paper we revisit the influential theory of monopolistic competition and optimum product variety as developed by Dixit and Stiglitz (1977) with applications in international trade by Krugman (1979,1980), by modeling fixed and variable costs of production in terms of underlying use of skilled and unskilled labor in a single good model. This is different from earlier work on multi sector variant of Krugman cum Heckscher-Ohlin-Samuelson model such as Helpman (1981) and others. In our structure factor endowment and factor intensities determine both number of varieties and output per variety in a closed economy mimicking the features of Heckscher-Ohlin-Samuelson model. Differences in factor endowments across countries determine the pattern of trade between varieties and output per variety, which is indeterminate in a standard single good Dixit-Stiglitz-Krugman model. Later we reflect on wage inequality and unemployment providing some interesting results.

Ruinous Competition in News, the Postal Internet, and the Three Laws of Techno-Legal Change

Policymakers’ current approach to the problem of online misinformation, which revolves around defining the circumstances under which content platforms like Twitter and Facebook may be held liable for the speech of their users, fails to get at the root cause of the problem: the low cost of communication. The theory of monopolistic competition teaches that businesses respond to low-cost entry into their markets, and the cutthroat competition it creates, by differentiating their products, sometimes in legitimate ways, but sometimes through deceit. Misinformation on the Internet has the same source: speakers using deceit to compete for attention in a highly competitive speech market. The solution, as in all cases of ruinous competition, is to replace the falling technological barriers to market entry that have given rise to the excessive competition with new legal barriers to entry. The way to create legal barriers to online speech is not to license speech, an approach that would violate the First Amendment, but rather to treat the Internet like a brick-and-mortar postal system. In the United States, the Postal Service enjoys a “letter-box monopoly:” the exclusive right to place mail in mailboxes. This exclusivity gives the Postal Service the power to charge a price—postage—for each communication delivered to an American mailbox. The U.S. Congress—or the Postal Service itself through reinterpretation of existing law—should give the Postal Service a letter-box monopoly on social media posting: the exclusive right to charge a fee for every Tweet, Facebook post, or other social media missive delivered in America. That would greatly increase the cost of being heard on the Internet, for as the number of a poster’s followers increases, the total cost of social media “postage” would increase as well, reducing competition and the incentive to misinform. Because the letter-box monopoly has survived constitutional scrutiny for two centuries, this approach would necessarily survive First Amendment scrutiny as well.

Essence of the company's profit

In the paper presents various points of view regarding the essence of profit. In particular, special attention is paid to the sources of its formation, according to various scientists. The essence of profit in the context of various types of competition is stated. The theory of the essence of profit is considered from the point of view of the Theory of monopolistic competition by E. Chamberlin. The point of view is expressed that the modern Western theory of profit is characterized by electivity, the presence of very different ideas about its economic content.Integrity is noted only in relation to the interpretation of the social essence of profit –in denying its exploitative nature and recognizing it as a legitimate, “natural” form of income.

A Theory of Monopolistic Competition with Horizontally Heterogeneous Consumers

Our novel approach to modeling monopolistic competition with heterogeneous consumers involves a space of characteristics of a differentiated good (consumers’ ideal points), alike Hotelling (1929). Firms have heterogeneous costs a la Melitz (2003). In addition to price setting, each firm also chooses its optimal location/niche in this space. We formulate conditions for positive sorting: more efficient firms serve larger market segments and face tougher competition in the equilibrium. Our framework entails rich equilibrium patterns displaying non-monotonic markups, high in the most and least populated niches, and the unequal gains from trade across different consumers.

Differentiation and pricing power of online retailers

This study aims to contribute to marketing theory by applying monopolistic competition theory to investigate how differentiation affects online retailers’ pricing power. We examine the intermediary effect of customer loyalty on the relationship between differentiation and pricing power of online retailers. We assume that customers have different preferences for the differentiated characteristics of online retailers, and thus different degrees of willingness to pay premiums, which gives online retailers pricing power. Structural equation modeling (SEM) is employed to test the hypothesized relationships between differentiation, customer loyalty, and pricing power. The statistical results of the empirical data indicate that some of the differentiation characteristics of online retailers can cultivate their pricing power indirectly. Logistics quality followed by commodity assortment and transaction security produces profound effects on the buildup of pricing power with customer loyalty as an intermediary factor. Results further reveal that commodity quality is positively related to pricing power. This study expands the definition of differentiation by combining corporate strategic positioning with commodity pricing. Implications for practice and directions for future research are provided.

Sponsorship for the Sustainability of Historical-Architectural Heritage: Application of a Model’s Original Test Finalized to Maximize the Profitability of Private Investors

This paper deals with private sponsorship as a tool for the redevelopment of Italy’s vast wealth of historical-architectural public heritage sites. Italian law provides for the stipulation of sponsorship agreements by and between public sector agencies or entities (which need financial resources to restore or re-qualify property) and private sector investors (which guarantee the capital sought by the public sector in exchange for significant returns on their investments) raising various economic issues, particularly in connection with the profitability thresholds for private sector investors in return for the public sector’s use of their financial resources. In this paper, the authors focus on how private sector investors determine how much of their businesses turnover constitutes the optimal percentage level of overall income that may be invested in sponsorships to maximize business profitability. For this purpose, a model based on past works on the subject (Bucci et al., 2003) has been chosen by the authors. Such model gives a solution for verifying a sponsorship’s profitability. This model is static and is applicable to single-product companies that invest in sponsorships, under the theories of monopolistic competition and of Cobb-Douglas production function. Our objectives are to present this model, explaining in detail the mathematical steps, simplifying the model where possible in order to reduce the levels of complexity in its application, and finally to apply it to real case scenarios of cultural sponsorships.

Trade liberalization gains under different trade theories: a case study for Ukraine

We analyze the deep and comprehensive free trade area (DCFTA) between Ukraine and the EU using a multi-regional general-equilibrium simulation model. Three alternative trade structures are implemented: (a) a standard specification of perfect competition based on the Armington assumption of regionally differentiated goods; (b) monopolistic competition among symmetric manufacturing firms; and (c) a competitive selection model of heterogeneous manufacturing firms. Across these structures the DCFTA indicates relatively large gains for Ukraine of more than 3 percent. We show, however, that the gains for Ukraine are lower when we consider monopolistic competition in manufacturing. This is attributed to a movement of resources into Ukraine’s traditional export sectors to the EU, which produce under constant returns. While there is little danger of deindustrialization dominating the overall welfare gains, we do observe substantially lower gains when we consider monopolistic competition. To our knowledge, this is the first empirical confirmation of the theoretic predication that the relative gains from trade in monopolistic competition models might be lower than under perfect competition in the context of a numeric simulation of economic integration. Under the popular heterogeneous-firms monopolistic competition theory we find significant firm selection effects indicating welfare impacts for Ukraine that are less than under the Armington structure but above those found under symmetric firms and monopolistic competition. These results are important considerations for Ukraine’s overall development strategy.

Distributional Comparative Statics with Heterogeneous Agents

We propose a formal way to systematically study the differential effects of exogenous shocks in economic models with heterogeneous agents. Our setting applies to models that can be rephrased as competition for market in a broad sense. We show that even in presence of any number of arbitrarily heterogeneous agents, a single recursion relation characterizes the distributional pattern of equilibrium market shares and related measures. We identify the general conditions under which the market share function rotates, thereby either causing more or less equality among the agents. Our setting highlights the exceptional rule that power functions play for the distributional effects. We apply our method across economic models, including examples from monopolistic competition, discrete choice, partial and general equilibrium theory and contest theory.

Toward a theory of monopolistic competition

We propose a general model of monopolistic competition, which encompasses existing models while being flexible enough to take into account new demand and competition features. Even though preferences need not be additive and/or homothetic, the market outcome is still driven by the sole variable elasticity of substitution. We impose elementary conditions on this function to guarantee empirically relevant properties of a free-entry equilibrium. Comparative statics with respect to market size and productivity shocks are characterized through necessary and sufficient conditions. Furthermore, we show that the attention to the CES based on its normative implications was misguided: we propose a new class of preferences, which express consumers' uncertainty about their love for variety, that yield variable markups and may sustain the optimum. Last, we show how our approach can cope with heterogeneous firms once it is recognized that the elasticity of substitution is firm-specific.

Toward a Theory of Monopolistic Competition

We propose a general model of monopolistic competition which encompasses existing models while being flexible enough to take into account new demand and competition features. Even though preferences need not be additive and/or homothetic, the market outcome is still driven by the sole variable elasticity of substitution. We impose elementary conditions on this function to guarantee empirically relevant properties of a free-entry equilibrium. Comparative statics with respect to market size and productivity shock are characterized through necessary and sufficient conditions. Furthermore, we show that the attention to the constant elasticity of substitution (CES) based on its normative implications was misguided: constant mark-ups, additivity and homotheticity are neither necessary nor sufficient for the market to deliver the optimum outcome. Our approach can cope with heterogeneous firms once it is recognized that the elasticity of substitution is firm-specific. Finally, we show how our set-up can be extended to cope with multiple sectors.

Monopolistic Competition: Critical Evaluation the Theory of Monopolistic Competition with Specific Reference to the Seminal 1977 Paper by Dixit and Stiglitz

This paper revisits the D-S (Dixit-Stiglitz) model. It’s a simple general monopolistic model with n monopolistic goods, and a numeraire good Labour ( w=1); aggregation for all goods in the economy. We have considered in our paper constant elasticity of substitution case(CES).On the supply side, the assumption is that the labour is perfectly mobile factor of production across the sectors, so as a result in our model there is single wage rate which we denote as in the other sectors than monopolistic there is constant returns to scale and we can specify the production function: The Dixit-Stiglitz model of monopolistic competition works only when n is large; from the functions of the productions best when one applies linear production function. Under increasing returns to scale monopolistic competition will lead to a greater degree of product differentiation than it is socially optimal.

Hostage to Fortune: Edward Chamberlin and the Reception of The Theory of Monopolistic Competition

In February 1933, Edward Chamberlin published The Theory of Monopolistic Competition. Joan Robinson's The Economics of Imperfect Competition followed in the spring. A disciplinary consensus quickly formed, holding that the two books represented simultaneous discoveries of the same theoretical ideas and covered the same ground. Chamberlin was adamant in insisting on fundamental differences between their positions. Convinced of the superior explanatory power of his work, he devoted much of his post–Monopolistic Competition career laboring to reverse the disciplinary consensus. We analyze the main tactics he employed in attempting to gain control of the reception of his theory and consider why they failed.