Elements of Numerical Mathematical Economics with Excel

6.11. Monopolistic market equilibrium: the Chamberlin model

The second type of market described here is the monopolistic competition (see E. Chamberlin, The Theory of Monopolistic Competition, 1933).

The main features of this form of competition can be summarized as follows:

1. • large number of players (households and sellers);
2. • low barriers to entry;
3. • differentiated products; however, the differences are not so great as to eliminate other goods as substitutes;
4. • players operate independently in the market, from each other;
5. • the firms face a downward-sloping demand curve. The sellers can slightly leverage on prices, which are not completely taken as given. This, together with the fact that the products are slightly differentiated, represents ...