On the Theory of Oligopoly

Abstract

The oligopoly model which is described in this paper does not pretend to generality. It is meant only to describe approximately the current behaviour of a class of firms and there is no doubt that in other times and circumstances the analysis may become totally inapplicable. Nor does it say anything about the strategic give and take which plays so important a part in the theory of games. And in some respects it breaks sharply with received oligopoly theory. But the model seems to accord fairly well with my own rather spotty observation of the behaviour of a number of American business firms. Moreover, it seems to explain several well-known features of business behaviour which have been puzzling, and to carry some concrete implications for welfare economics, taxation theory, development theory and the theory of monetary and fiscal policy in which the place of oligopoly has been somewhat obscure. A few of these applications are described below.

This paper is taken from a forthcoming book tentatively entitled Business Behavior, Value and Growth (to be published by the Macmillan Company in New York). I must express my gratitude to the Guggenheim Foundation for the generous grant which enabled me to complete the manuscript. The paper was delivered as a public lecture at the London School of Economics.