Abstract
The aim of this chapter is to examine the effects of entry of new firms in a symmetric differentiated products industry, in particular the effect on the profits of firms already in the industry. Purposely, our models are kept close to those of a Chamberlinian industry, but with this exception: because of the implicit indivisibilities, it would be only by accident that profits are zero at free entry equilibrium (as they also are in Joan Robinson’s models). Typically, the entry of an additional firm would (under symmetry assumptions) result in negative profits for everyone, but if an additional firm does not enter profits at equilibrium are positive.
Economics Department, University of Minnesota. This work was supported by National Science Foundation Grants SES-8509547 and IRI-8510042 and earlier NSF grants.
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Notes
G. A. Feldman, ‘On the Theory of Rates of Growth of National Income’, Planovoe khozyaistvo, November 1928, No. 11, pp. 146–170 and December 1928,
O. Lange and F. M. Taylor, On the Economic Theory of Socialism, Minneapolis, Minn., 1938.
C. W. Cobb and P. H. Douglas, ‘A Theory of Production’, American Economic Review, March, 1928, pp. 139–165; A. I. Notkin, ‘Technological Progress and the Growth of Production’, Izvestiya otdeleniya ekonomiki i prava Akademii Nauk SSSR, no. 2, 1946, pp. 145–168.
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© 1989 George R. Feiwel
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Hurwicz, L. (1989). Effects of Entry on Profits under Monopolistic Competition. In: Feiwel, G.R. (eds) The Economics of Imperfect Competition and Employment. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08630-6_9
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DOI: https://doi.org/10.1007/978-1-349-08630-6_9
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