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Article
Publication date: 1 January 1987

R. Rothschild

In 1933, Edward H. Chamberlin published the Theory of Monopolistic Competition (1962). The work, based upon a dissertation submitted for a PhD degree in Harvard University…

Abstract

In 1933, Edward H. Chamberlin published the Theory of Monopolistic Competition (1962). The work, based upon a dissertation submitted for a PhD degree in Harvard University in 1927 and awarded the David A. Wells prize for 1927–28, has since become a milestone in the development of economic thought. Its impact on industrial organisation theory, general equilibrium and welfare economics, international trade theory and, to a greater or lesser degree, all other branches of economic analysis, has been pervasive and enduring. The ideas set out in the book have been developed, expanded and refined in ways too numerous to be identified precisely, and the books and articles which take Chamberlin's contribution as a starting point arguably exceed in number those on any other single subject in the lexicon of economics.

Details

Journal of Economic Studies, vol. 14 no. 1
Type: Research Article
ISSN: 0144-3585

Article
Publication date: 1 April 1983

Andrew S. Skinner

The Preliminary Argument The fifteen years following the end of the Great War saw considerable activity amongst economists concerned with competitive structures and the…

Abstract

The Preliminary Argument The fifteen years following the end of the Great War saw considerable activity amongst economists concerned with competitive structures and the “firm”. As has been argued elsewhere much of this work may be interpreted as an attack on Marshall's treatment of the subject with a view to replacing it by a more “rigorous” and formal analysis. E. H. Chamberlin to a very large extent stands apart from these developments, as he makes plain in the “Origin and Early Development of Monopolistic Competition Theory” (1961). Serious work on his thesis apparently began in 1924, was largely completed in 1926 and the study filed in the following year. This means that Chamberlin's “discovery” of the curves of marginal cost and marginal revenue was made quite independently of his English and German colleagues. Further, as Chamberlin himself made clear, the thesis had no link either with Sraffa or the Symposium of 1931: “Nor did the Book itself attack Marshall…on any of the issues there involved” (ibid., p. 532). Indeed, he always insisted that his work was an attack “not on Marshall, but on the theory of perfect competition” (ibid., p. 540). He might have added that Monopolistic Competition is essentially Marshallian both in its style of reasoning and in the pre‐occupation with realism; a pre‐occupation which led Chamberlin to play down the operational significance of the marginal curves while recognising their importance in a technical sense (1957, pp. 274–76).

Details

Journal of Economic Studies, vol. 10 no. 4
Type: Research Article
ISSN: 0144-3585

Book part
Publication date: 17 July 2006

Humberto Barreto

“The second attempt to model monopolistic competition was far more successful than the first, essentially because the second attempt introduced a formalization that had…

Abstract

“The second attempt to model monopolistic competition was far more successful than the first, essentially because the second attempt introduced a formalization that had all the relevant characteristics of monopolistic competition but was still relatively easy to handle” (pp. 1–2). The story of the first revolution is that various precursors, such as Marshall, understood that the middle ground between perfect competition and monopoly was fraught with danger, so they avoided it. In the 1930s, Edward Chamberlin and Joan Robinson independently applied the marginal revenue curve to draw the now-familiar equilibrium position for a profit-maximizing, monopolistically competitive firm. However, the first revolution never really succeeded: “Given the elegance of the monopolistic competition model, it is surprising to see how little influence it had on economic theory” (p. 10). Several of the papers make reference to the failed 1930s monopolistic competition revolution without going into detail. It seems that it is an agreed upon fact.

Details

Research in the History of Economic Thought and Methodology
Type: Book
ISBN: 978-0-76231-349-5

Article
Publication date: 1 February 2004

Joseph T. Salerno

The theory of monopoly price was originally formulated by Carl Menger at the inception of the marginalist revolution in 1871 and represented the dominant theoretical…

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Abstract

The theory of monopoly price was originally formulated by Carl Menger at the inception of the marginalist revolution in 1871 and represented the dominant theoretical approach to monopoly until the 1930s. Despite its impeccable doctrinal pedigree and lengthy dominance, the theory abruptly disappeared from the mainstream neoclassical literature after the Monopolistic Competition Revolution, to be revived and reformulated after World War II by Ludwig von Mises. The present paper describes the theory as it was offered in its most sophisticated pre‐war form by American economist Vernon A. Mund, who published an unjustifiably neglected volume on monopoly theory that appeared in the same year as the classic works by Joan Robinson and Edward Chamberlain. This paper then attempts to draw out the critical implications of Mund’s formulation of the theory for the current neoclassical orthodoxy in monopoly and competition theory, including the elasticity of demand curves facing individual producers under competition, the time perspectives that are most relevant in analyzing the pricing process, the proper role of long‐run equilibrium in this analysis, and the misapplication of the marginal revenue and marginal cost concepts. Finally, the paper suggests a number of reasons why the theory was swept aside in the aftermath of the Chamberlain/Robinson Revolution with almost no resistance from its most prominent exponents.

Details

Managerial Finance, vol. 30 no. 2
Type: Research Article
ISSN: 0307-4358

Keywords

Book part
Publication date: 9 July 2010

Thomas C. Powell, Noushi Rahman and William H. Starbuck

This chapter explores the origins of the theme of competitive advantage in 19th and early 20th century economics. This theme, which forms the core of modern Strategic…

Abstract

This chapter explores the origins of the theme of competitive advantage in 19th and early 20th century economics. This theme, which forms the core of modern Strategic Management, was a battleground for debates about the value of abstract theory versus observations about real-life events. Intellectual genealogies, citations, and other sources show the central roles played by the University of Vienna and Harvard University. These two institutions strongly influenced the theory of monopolistic competition as well as all three modern views of competitive advantage – the industrial as expressed by Porter, the resource-based as expressed by Penrose, and the evolutionary as expressed by Schumpeter.

Details

The Globalization of Strategy Research
Type: Book
ISBN: 978-1-84950-898-8

Article
Publication date: 20 February 2020

Mohd Faizal Basri

This paper aims to investigate the impact of competition in the Malaysian Islamic banking industry and the market structure of the industry by focusing on the particular…

Abstract

Purpose

This paper aims to investigate the impact of competition in the Malaysian Islamic banking industry and the market structure of the industry by focusing on the particular impact created by the entrance of fully fledged foreign Islamic banks plus the introduction of Islamic subsidiaries of existing conventional banks in the country (domestic and foreign ownership).

Design/methodology/approach

Using a sample of 16 Islamic banks in the country that operated between 2008 and 2015, this paper measures the competition among the Islamic banks using the Panzar-Rosse Model and by looking at the market structure of the industry using the k-bank concentration ratio and the Herfindahl-Hirschman Index.

Findings

The study found that between 2008 and 2015, the Malaysian Islamic banking industry operated in monopolistic competition conditions with a moderately concentrated market structure. The introduction of foreign Islamic banks caused the market structure to become more competitive and less concentrated by comparing the results that include foreign Islamic banks against the results generated with a subsample of domestic Islamic banks only. Bank Negara Malaysia’s (BNM’s) financial reform and the liberalisation of the financial system were proven to induce competition making the financial system more resilient, competitive and dynamic. The Islamic banks have recorded consistently increased annual performance with the under-performing Islamic banks catching up on the top performers.

Originality/value

Very few research studies have focused on the market structure and competition of the Islamic banking industry in Malaysia, especially using recent financial data; this study will contribute to filling the existing gap.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 28 May 2020

Rafik Harkati, Syed Musa Alhabshi and Salina Kassim

This paper aims to assess the nature of competition between conventional and Islamic banks operating in Malaysia. It is an effort to enrich the existing literature by…

Abstract

Purpose

This paper aims to assess the nature of competition between conventional and Islamic banks operating in Malaysia. It is an effort to enrich the existing literature by offering an empirical compromise on the differences in the results of studies related to competition between the two types of banks.

Design/methodology/approach

Secondary data on all banks operating in Malaysia’s diversified banking sector is collected from the FitchConnect database for the period 2011-2017. A non-structural measure of competition (H-statistic) as informed by Panzar–Rosse is used to measure the competition between conventional and Islamic banks. Panel data analysis techniques are used to estimate H-statistic. Wald test for the market structure of perfect competition/monopoly is used to affirm the validity and consistency of the results.

Findings

The findings of this study signify that the Malaysian banking sector operated under monopolistic competition during the period of study. The long-run equilibrium condition holds for the Malaysian banking sector. Competition among conventional banks is more intense than that among Islamic banks. Financial reform endeavours of Bank Negara Malaysia (BNM) along with the liberalisation wave of the financial system were successful in promoting competition, rendering the financial system contestable, resilient and dynamic.

Practical implications

Regulators and policymakers may find the results beneficial in terms of rethinking the number of banks operating in the Islamic sector. The number of banks, however, is not the only determinant of competition in the banking sector. Implications of competition change for stability and risk-taking behaviour of banks should be considered.

Originality/value

Within the context of Malaysia’s diversified banking system, given the contradictory results reported in studies on competition, this study is an effort to provide a plausible middle ground. It suggests a possible answer as to why competition nature has not changed since the policy change initiatives of BNM, namely, banks merger, expansion of Islamic banking operation scope and liberalisation process.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 9
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 18 April 2017

Cupian and Muhamad Abduh

The purpose of this paper is to examine the competitive conditions and market power of Islamic banks in Indonesia for the period of 2006-2013.

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Abstract

Purpose

The purpose of this paper is to examine the competitive conditions and market power of Islamic banks in Indonesia for the period of 2006-2013.

Design/methodology/approach

Using samples of 27 Islamic banks, the study uses a variety of structural and non-structural measures related to the traditional approach and the new empirical approach of the industrial organization. The methodology is based on a set of measures of the competition and market power. The first measures, concentration ratios and Herfindahl–Hirschman index, are to determine the competitiveness level, while the second measures of Panzar–Rosse H-statistic and Lerner index are to examine the market power of Islamic banks in Indonesia.

Findings

The finding of this study has confirmed the situation of Islamic banking industry in Indonesia which is operated in a higher degree of market power which leads to a less competitive market. Islamic banks earn their revenues under monopolistic competition over the tested period. This study has also found a negative but insignificant relationship between concentration and competition which shows that in the past few years, the market power for leading firms in Indonesia Islamic banking industry has reduced.

Practical implications

The paper is a very useful source of information that may provide relevant guidelines in guiding the future development of competition of Islamic Banking industry. In addition, the paper provides relevant guidelines for improving competitiveness of Islamic banks.

Originality/value

This study combines two approaches for bank competition measurement and bank market powers measurement which can provide more robust findings. To the best of the authors’ knowledge, the study on Islamic banking competitiveness level and market power is very limited, especially in the case of Indonesia. Therefore, this study could contribute significantly toward the literature of the related field.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 10 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 12 February 2018

Thao Ngoc Nguyen, Chris Stewart and Roman Matousek

This paper aims to examine the market structure of Vietnam’s banking sector during 1999-2009, which is after the introduction of the two-tier banking system, using the…

Abstract

Purpose

This paper aims to examine the market structure of Vietnam’s banking sector during 1999-2009, which is after the introduction of the two-tier banking system, using the non-structural (Panzar–Rosse) model.

Design/methodology/approach

The authors consider a more comprehensive range of specifications, in terms of a greater number of environmental covariates and different dependent variables, than in the previous applications of this model. Further, this is the first study that uses lagged input prices (to avoid endogeneity), excludes assets (to avoid specification bias) and includes a lagged dependent variable (to avoid dynamic panel bias) in such a study of the Vietnamese banking system.

Findings

The authors find that the Vietnamese banking system operates in monopoly.

Originality/value

The main contribution of this paper is to determine the market structure in the recent period after the Vietnamese banking system was transformed into a less centralised, two-tier system. This study is the first to uniquely identify the market structure of this developing economy’s banking system (using data only for Vietnam and not observations from other countries) in a post-transition period.

Details

Journal of Financial Regulation and Compliance, vol. 26 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 8 March 2022

S. Yamini and M.S. Gajanand

Flexible return policies are offered by the manufacturers to encourage the retailers announcing a lenient returns scheme to their customers.

Abstract

Purpose

Flexible return policies are offered by the manufacturers to encourage the retailers announcing a lenient returns scheme to their customers.

Design/methodology/approach

This study considers the distribution of durable products in a supply chain where the demand is sensitive to sales effort and retail price. Using a game theoretic framework, the paper presents an assessment of the strategic effect of flexible returns policy announced by the manufacturer under retail competition and highlights its implications on profitability.

Findings

Comparative analysis of monopolistic and duopolistic competition provides a better understanding about the repercussions and related facts on offering a flexible returns policy in these environments. It is profitable for the manufacturer to offer a flexible returns policy when there is retail competition than under monopolistic condition.

Practical implications

Practitioners view returns policy offered as an insurance given to the buyers and they infer it to be a better mechanism for doing business. Lenient returns policy promotes the sales by increasing the trust on the retailer and boosts up the perception of quality about the product by lowering the perceived risk for customers.

Originality/value

Effective product return strategies such as being lenient in terms of time, money, effort, scope and exchange can result in increased revenues, lower cost and improved profitability to the manufacturer and retailer, at the same time offering an enhanced level of customer service.

Details

Benchmarking: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-5771

Keywords

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