A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many
It is a widely held belief that in imperfect markets the tendency to cooperate depends on the number of competitors. E.H. Chamberlin's distinction between the small group and the large group is based on this assumption. Cooperative forms of behaviour like joint profit maximization are assumed to be typical for markets with a small number of competitors and non-cooperative equilibria are expected, if the number of suppliers is sufficiently large. The theory presented in this paper investigates the connection between the number of competitors and the tendency to cooperate within the context of a simple model. The proposition that few suppliers will maximize their joint profits whereas many suppliers are likely to behave non-cooperatively does not appear as an assumption but as a conclusion of the theory.
|Date of creation:||Feb 1973|
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