The Restoration of Pure Monopoly and the Concept of the Industry

Abstract

This paper is designed to show that the concept of ‘pure monopoly’ and the concept of ‘industry’ can be given precise theoretical definitions, and to argue that these concepts, which some modern economists reject, deserve prominent places in the theory of market structure. These concepts have been wrongly rejected, this article argues, because an excessive reliance on elasticity and cross-elasticity of demand has obscured important aspects of market structure theory.

The authors are indebted to several of their colleagues at Princeton University and at the U.S. Air Force Academy for helpful criticism, especially Professors Jesse Markham, Richard Quandt, Lee Baldwin, Aldrich Finegan, Colonel Wayne Yeoman and Captain Edward Claiborn. None of the critics is responsible for any errors. Both authors are on the faculty of economics at Princeton University, but Lt. Olson is on military leave, stationed at the Department of Economics at the Air Force Academy, which he thanks for generous encouragement of this project. The authors also thank the Princeton University Research Fund for support.