Until Edward Hastings Chamberlin (1899--1967) attempted to fuse the theories of monopoly and competition, the case of many sellers offering differentiated products had been overlooked. Earlier mainstream economists concentrated on the theory of pure competition, which assumes many sellers of homogeneous products. Chamberlin instead saw close competitors in nearly every market trying to gain market power by differentiating their products. For example, firms often allege the superiority of their products over others.

            Born in La Conner, Washington, Chamberlin revised his Harvard Ph.D. dissertation and published The Theory of Monopolistic Competition in 1933. His was among the few dissertations to ever profoundly alter economic theory. The central feature of his analysis is that it portrays the demand curves facing firms with differentiated products as being negatively sloped.

            In other words, firms that compete on the basis of product differences could raise prices without losing all their customers, but they would sell less output. This fact mirrors elements of monopoly. However, competition tends to lower this negatively sloped demand curve to a point of tangency with the firm's average total cost curve, so that no monopoly profits are realized in the long run. Chamberlin's theory combined with Joan Robinson's ideas to spark numerous studies of industrial markets in the 1940s and 1950s. These analytical feats have provided useful insights into numerous market situations. In Robinson's phrase, she and Chamberlin introduced a "box of tools" sharper and more generally applicable than those that preceded their works.

 

                        I don't know much math, so I have to think.

                                                                                    Joan Robinson

The iconoclastic British economist Joan Robinson (1903--1983) was a combatant in virtually every major controversy in economic theory and policy between 1930 and 1983. However, her foes joined her friends in admiring the innovative quality of her ideas and research. She married E. A. G. Robinson (another distinguished British economist) after completing her formal studies in economics, and was among the small group of Cambridge University economists who aided John Maynard Keynes in launching the Keynesian Revolution.

            An avowed radical and Marxist, her writings blended the insights of Keynes, Marx, and neoclassical reasoning in a manner uniquely her own. Robinson's work bridged capital theory, the theories of value and distribution, macroeconomics, and the economics of policy making, but her most noteworthy contributions were in the area of imperfect competition. At almost exactly the same time that Chamberlin issued his theory of monopolistic competition from Cambridge, Massachusetts, Joan Robinson launched a parallel theory from Cambridge, England in The Economics of Imperfect Competition.

            Robinson's "imperfect competition," however, stresses oligopolistic interdependence and views competition and monopoly as mutually exclusive, while Chamberlin identified modern business as a blending of the two. Robinson refined the theory of price discrimination, introduced the concept of monopsony power (that is, the ability of powerful buyers to control prices), and separated average revenue (demand) and marginal revenue curves.

End Biography