Monopolistic Competition

Abstract

Undoubtedly, imperfect competition is one of the most interesting and yet one of the most difficult topics in economics. A cursory glance of any textbook on imperfect competition will likely give an impression of a showcase on various models of market structure without much unifying themes across various models. We believe that it is very difficult to avoid this impression simply because there are too many ways for a market to be imperfect. In particular, there are so many formulations possible regarding what each firm is supposed to know about consumers and also what each firm is supposed to think what other firms will be behaving. Of course, a fascinating direction to which we ought to proceed would be to find a way to rationalize why firms would form particular perceptions and conjectures over consumers and other firms and how firms would adopt strategies suitable for particular perceptions and conjectures. Until we succeed in doing this, we may have to content ourselves with a showcase of various models.