ECON 208 Lecture Notes - Lecture 18: Edward Chamberlin, Monopolistic Competition, Perfect Competition

• School: McGill University
• Department: Economics
• Course: ECON 208
• Professor: Eesha Sen Choudhury

Document Summary

We now go into more detail and make a distinction between industries with a large number of small firms (monopolistic competition) and industries with a small number of large firms (oligopoly). The key difference between these two market structures is the amount of strategic behaviour displayed by firms. Characteristics/assumptions of monopolistic competition : each firm produces its own version of the industry"s differentiated product. Low concentration ratios and differentiated products: restaurants, clothing stores, hair stylists, auto mechanics, corner stores (geographic space) Like pc, can be short-run economic profit or loss (here, it is positive in sr) Are we willing to pay for variety: more "real-world" than pc or monopolistic competition. 11. 3 oligopoly and game theory: oligopoly is an industry that contains two or more firms, at least one of which produces a significant portion of the industry"s total output, high degree of interdependence. *governments often try to prevent collusion, unless it is beneficial.