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2. E.Chemberlina's concept about the mechanism of a monopolistically competitiveness on the basis of differentiation of a product

The central place in theory E.Chemberlina takes the analysis of differentiation of the product, carried out by it in IV-VIII heads «Theory of a monopolistically competitiveness» (it is direct in chapters IV - V) which general sense consists that, creating the special submarket, the firm supplies to itself the known stability, stable sales of production.
Therefore the differentiation is a natural reaction to the competitors, natural display of the competitiveness. E.Chemberlin in the concept from this proceeds, analyzing problems not price конкуренции16 between manufacturers of the goods - of substitutes to which in theory neoclassics HK - beginnings HH centuries practically it was not given attention. He notices, that the differentiation can base, in the first, on certain features of the product (the special patented properties - trade marks, firm names, a packing or container originality); Secondly, on the specific features concerning quality, the form, colour or style of the goods; on the conditions accompanying sale of the goods, - in retail trade this convenience of a site of the seller, a manner of management by it of dealings, its reputation, courtesy, etc. Considering these two parties of differentiation, becomes clear, that “all products in effect differ from each other - at least slightly differ - and that in extensive economic activities the differentiation plays the important role” [In the same place. With. 94]. In particular, about E.Chemberlin's this problem speaks as about a problem “arrangements of economic forces” in the economic activities which decision has allowed an economic science to put forward two theories: 1) the theory of a competitiveness and 2) the monopoly theory. On the one hand, if the product has the finished originality (for example, tram services), the patent or the copyright it is considered as result of monopoly. The explanation of cost of the patented goods bases on aspiration of a monopolist to receive the maximum profit in the market. On the other hand, if the product is allocated less accurately among similar products of the same nomenclature it unites with them and considered in the form of a part of production of the given branch having competitive character. In case of an explanation of cost and the formations of prices of goods having the trade mark, start with achievement of balance between a supply and demand in much wider sphere. That is, “all cost problems are paid in this or that category depending on an element which in them prevails” [In the same place. With. 94]. E.Chemberlin pays attention to the following circumstances distinguishing the theory of a monopolistically competitiveness, based on differentiation of a product, from the theory of monopoly and from the orthodox theory of a perfect (pure) competitiveness. The theory of a monopolistically competitiveness differs from the theory of monopoly that it: • includes the theory of monopoly and its beret as an analysis starting point. Accept as the basis the theory of a competitiveness the theory of a monopolistically competitiveness cannot, as «the monopoly theory at least recognises, that the problem includes both beginnings while the competitiveness theory excludes monopoly elements, considering them as the moments“ imperfections of "competitiveness" [In the same place.
With. 107-108]. • Deals not only with a problem of individual balance (the usual theory of monopoly being object), but also with a problem of group balance - “a problem vzaimoprisposoblenija economic forces in group of monopolists competing among themselves which was considered earlier simply as group of competitors” [In the same place. With. 108]; • Puts in the forefront the elements of monopoly connected with partial independence of each manufacturer, caused, for example, that: price cut by one seller will not undermine definitively the trade, a same city being in others part; each seller has a sphere of sales which only is partly accessible to other so for each is available own клиентура17. The theory of a monopolistically competitiveness based on differentiation of a product, differs from the theory of a pure competitiveness that [See: In the same place. With. 111-112]: • In model of a pure competitiveness where the market of the separate seller completely merges with the general market, the seller has possibility to sell on an established price so much goods, how many to it will like. At a monopolistically competitiveness where the market of the separate seller is to a certain extent isolated from the markets of its contenders, the volume of its sales is limited and defined by three new developments: 1) The price, 2) features of a product and 3) publicity expenses. The deviation of a curve of demand for a product in the conditions of a monopolistically competitiveness from a horizontal line of demand for a product in the conditions of a pure competitiveness “creates a problem of the prices which are absent at a pure competitiveness for the seller; this problem coincides with that which we usually face when we deal with a monopolist. As the profit of the seller depends on degree of elasticity of a curve of demand and from Its positions in the relation of a curve of costs on its product to increase it it is possible, having sold or bulshuju commodity weight for a cut-rate price, or smaller commodity weight on an advance price. Will always search for that price which is capable to finish total profit to a maximum ”[72. In the same place. With. 111]; • owing to the differentiation fact before the seller there is a new problem is a regulation of a product which can be carried out in various forms (see tab. 2); Table 2 Product regulation on E.Chamberlin [See: In the same place. With. 111-112] Change of quality of a product Increase of culture of Service of the Form reguli rovanija produk That Change of those - is skih features of the goods Creation new a game - struk - tsii the goods Selection of the best material for goods creation Sover - shenst - vovanie packing or container Fast and vnima telnoe service of buyers Uluch shenie Forms organi zatsii The auctions Whether the Choice of other a place - of position of a trading house only Houtelinga ”18, - adds E.Chemberlin in the note. - Century B) did not come to mind, that return statement of a problem at which product regulation at the set price» [In the same place becomes object of research is possible. With. 113]. This third factor, - writes E.Chemberlin, - also is “specific feature of a monopolistically competitiveness as in the conditions of a pure competitiveness where any manufacturer has possibility to sell so much, how many it is necessary for it, advertising would be aimless” [In the same place. With. 112-113]. After consideration of cases of market clearance in the conditions of differentiation of a product when are changed the price (at a product invariance), a product (at a price invariance) and simultaneously the product and the price [See: In the same place. With. 133-149], E.Chemberlin passes to research of the balance accompanied by existence so-called “redundant capacities”. Let's admit, - he, - that before us writes a case when the price is at the limit up, i.e. (fig. 13) [See level BQ: In the same place. With. 133]. Each of sellers considers this level as the most favourable. It does not mean, that is temporarily (i.e. in the short-term period) the received weight of profit FHQE such and will remain, as the given general sphere is accessible to competitors. Occurrence of the new enterprises will soon lead to distribution of cumulative sales of products, possible at the given price, between the increased number of sellers. Line DD ', representing “the market existing on a product of any seller”, will be displaced to the left, yet will not take the position represented in drawing 14 [See: In the same place. With. 135], at which sales volume Each of sellers it is equal OV, costs (at price ВQ) coincide with the price and redundant profits are absent. Inflow of resources in the given sphere and outflow of resources from it will not occur any more; nobody is able benefit neither by increase of the price, nor from its decrease. If the price was on an intermediate level, - between AR and BQ, costs would be made even to the price as a result of similar, but not so large increase in investments over "ideal" volume. Let's admit, - writes E.Chemberlin, - that at first the price was equal AR, and then in this branch of production new resources have acted. In this case the curve of demand DD ' will move to the left, and price AR will not cover costs. Businessmen will start to search for higher limit, necessary to make ends meet. They will rise the price which will be made even again to production costs. Such Y

Drawing 14

Drawing 14 In the image, “before us a case when the increased offer conducts not to decrease, and to a rise in price. Border of this process is ВQ - and as soon as the number of the businessmen who were reasonable in this sphere, becomes sufficient for an establishment of this price, it acquires stable character” [In the same place. With. 150]; and the tendency to an establishment of this price ВQ - the heavy price of balance acts. To other factors interfering reduction of prices, E.Chamberlin carries [See: In the same place. With. 150-152]: - Official or tacit agreements on keeping of the prices, directed on strengthening of "class spirit”; - Imposing by industrialists of the identical prices to retail dealers; - The overwork differentiation of a product which are carried out in interests of derivation of attention from the price; - Submissions of businessmen about "neetichnosti" undercuttings; - Inherent in the consumer “propensity to consider more a low price as an indicator more poor quality of a product”; - Price-fixing by custom or tradition when “the prices in general are deprived of freedom movements”. “The general result” actions of these factors is “surplus of capacities” [In the same place. With. 154], being “perma - nentnoj and normal line of the mechanism of balance” [In the same place. With. 221], “also there is no force which automatically would eliminate it”. E.Chemberlin underlines, what exactly “specific feature of a monopolistically competitiveness is that surplus of capacities can accrue during the long periods with impunity (as the prices always cover costs) and can become owing to absence of a price competition to constants and an everyday occurrence” [In the same place. With. 154]. Having investigated questions of regulation of the price and a product when curves of costs comprised only the expenses connected with production of the goods, for satisfaction of already available demand, and did not include the expenses connected with creation or increase of demand, E.Chamberlin passes to the closing stage of creation of the theory on which aspires “to consider that fact, that advertising changes inquiries and that accounts of businessmen in a significant part are connected with survey of the most favourable volume of the costs intended for this purpose” [In the same place. With. 163]. E.Chamberlin decides this problem in УІ and At ІІ heads «Theory of a monopolistically competitiveness». On E.Chemberlinu, the costs, made to adapt a product for demand, “an essence production costs”; the costs, made to adapt demand for a product, “an essence sales costs”. Side realisation between two cost types, - is underlined by him, - “has for the cost theory the same fundamental significance, as distinction realisation between the offer and demand”; “sales costs, - the scientist explains, - increase demand for a corresponding product; production costs increase its offer” [In the same place. With. 173]. The importance of the given problem “partially speaks that the theory of a pure competitiveness and the monopoly theory have not been united in the synthetic theory. The theory of a pure competitiveness, quite naturally, has bypassed a problem of costs of sales as these costs do not keep within frameworks of initial parcels of a pure competitiveness” [In the same place. With. 174.] . The given theory starts with a silent assumption, that all costs are expended for increase in the offer of the goods and that these goods come true without any efforts and additional charges. In this occasion it is possible to tell, that ignoring of costs of sales “is the most obvious certificate of that this theory not in a condition to explain the real facts of an economic life” [In the same place. With. 175]. Finding-out by scientist in VII-VIII heads «Theory of a monopolistically competitiveness» of a sales problem, or, realisations of the goods had huge significance as for the cost theory, - it reorientatsii, and for formation of the theory of marketing. Taking into consideration sales costs, - E.Chemberlin writes, - we «will come to such condemnation of the theory of a pure competitiveness which is not reduced any more to instructions only on errors of a quantitative order. Everywhere, where there are sales costs (and to some extent they exist almost for all goods), to formulate a price problem in categories“ competitive ”curves of demand and costs will be not only is inexact, but also it is impossible» [In the same place. With. 223]. The American economist conducts quantitative comparisons between results of a monopolistically and pure competitiveness, using the diagrammes representing graphically action of the mechanism of balance at a monopolistically competitiveness (fig. 15 see) [See: In the same place. With. 197]. Y WITH

Рисунок15 The redundant profit, i.e. profit over a necessary minimum, can arise and can not arise; the schedule illustrates an example in which it is not present. Besides, by drawing consideration it is necessary to consider, that it it is constructed for "product" which allows to give the most favourable decision of a problem as a whole. PP ' - a curve of production costs and CC ' - a curve of the combined production costs and sales at an assumption, that the price is constant and remains at level 0M. As to production volume it is equal 0A as this quantity is indicated by a point of a contact of curve CC ' with a line of prices MD. FF ' - a curve of the combined production costs and sales at an assumption of an invariance of costs of sales and dd ' - the curve of demand showing change of demand with change of the price when sales costs are kept at the level defining curve FF '. These two curves precisely also concern one another in point Q. From the schedule becomes obvious, that any changes in size of expenses on sales or in the price “are impossible without the loss” [In the same place. With. 198]. The increase or reduction of expenses on sales, - indicates E.Chemberlin, - at a constant price will lead to the loss owing to that CC ' lays above MD on either side of from point Q. The increase or price reduction at invariable expenses on sales will cause the loss because FF ' lays above dd ' on either side of from Q [See: In the same place.]. Despite importance of the conducted quantitative comparisons, E.Chemberlin believes necessary to underline: “the most essential is a qualitative comparison” a monopolistically competitiveness to a pure competitiveness. “The theory of a pure competitiveness is unreal in a significant part because not in a condition correctly to present the forces acting in economic system... The Economic thought has appeared completely under the power of idea of a certain condition of the balance defined by the equation of the offer and demand, taken of the competitive theory. In the order of business there is a processing of various of interest areas of an economic theory on the basis of a category of a monopolistically competitiveness” [In the same place. With. 226. podch. Us. - CENTURY B]. E.Chemberlin has paid attention that the monopolistically competitiveness on the basis of differentiation of a product requires entering of essential changes into the revenue distribution theory. And in the chapter of VIII work the American scientist suggests to modify the orthodox theory of distribution which are starting with the out-of-date concept of a limit of efficiency of factors of production [See: In the same place. With. 227], that testifies to simultaneous revision by it and the orthodox theory of cost and pricing. The problem essence is reduced to the decision of E.Chemberlinom of a question new to an economic science: whether the law of a limit of efficiency of factors of production in the conditions of a monopolistically competitiveness "Works", or, what the same, whether holders of factors of production in the given conditions receive the incomes equal (in the monetary form) to the products created by them? Having solved this question, it is possible to speak about existence or absence in the conditions of a monopolistically competitiveness of the phenomenon of "operation" of hired workers. E.Chemberlin has paid attention that the monopolistically competitiveness on the basis of differentiation of a product requires entering of essential changes into the revenue distribution theory. And in the head At ІІІ the work the American scientist suggests to modify the orthodox theory of distribution which are starting with the out-of-date concept of a limit of efficiency of factors of production [See: In the same place. With. 227], that testifies to simultaneous revision by it and the orthodox theory of cost and pricing. Essence of this problem, - difficult by E.Chemberlina's recognition. - it is reduced to the decision of a question new to an economic science: whether the law of a limit of efficiency of factors of production in the conditions of a monopolistically competitiveness "Works", or, what the same, whether holders of factors of production in the given conditions receive the incomes equal (in the monetary form) to the products created by them? Having solved this question, it is possible to speak about existence or absence in the conditions of a monopolistically competitiveness of the phenomenon of "operation" of hired workers. At the decision of a problem the scientist recognises that the theory of a limit of efficiency developed in J. B Clark [See: 20. With. 312-323], it is valid in the conditions of a pure competitiveness. «Its central position, that production factors are paid according to them“ a limit of efficiency ”, supposes the most various interpretation. For our purposes three possible significances of concept“ a limit of efficiency ”are important. It can concern any of three additions caused by availability of limiting unit of some factor:) to a natural product, b) to cost of a natural product or) to the income» [72. With. 227]. The first significance of a limit of efficiency is connected with the possible approach to a limiting product as natural, that, basically, is not characteristic for market economy. The second significance of concept "limit of efficiency" concerns cost of a natural product, means “the natural product multiplied by its sale price”, or “an equivalent of a natural product in money terms. This significance., - speaks E.Chemberlin, - we will adhere” [72. With. 228]. Arguing on the third significance of the term "limit of efficiency", E.Chemberlin indicates, that it “something absolutely distinct from a natural product or its money's worth”. The given concept concerns to “to the additional income, namely a difference between size of the total income (equal to the price of unit multiplied by number of units), received when last unit of the given factor is applied, and size of the total income when this last unit is not applied” [In the same place. With. 228]. Resorting to the help of the schedule (fig. 16 see), it is possible to tell the following: at increase in quantity of a product from OA to OV owing to addition of one more worker cost of a limiting product will be vyra - to press close by area АВQН, the product marginal revenue will be equal to difference ОВQN - OARM. The businessman both at pure, and at a monopolistically competitiveness, is interested only in a marginal revenue of a product of those factors of production which it applies. But at a pure competitiveness the businessman in a condition to change volume of production without that it has aloud affected the price. Therefore the product marginal revenue is identical with cost of a limiting product. That is, as _в conditions “a pure competitiveness the curve of demand for a product of the separate manufacturer is a horizontal line the curve of a marginal revenue of this manufacturer coincides with it” [In the same place. With. 229].

Drawing 16 And it is important to underline, that the marginal revenue is always equal to a sale price. I.e. the limiting product and a product marginal revenue are always identical. Other situation develops in the conditions of a monopolistically competitiveness »at which the number of variables increases. Production volume in this case only partially an agreed price. Now it is function also"product"and sales costs. From fig. 16 it is visible, that the curve of demand for a product of the separate manufacturer has an inclination meaning, that a marginal revenue of a product of any factor of inevitably less cost of a limiting product of this factor. If DD ' there is a curve of demand for a product of one seller at a monopolistically competitiveness and the additional worker increases a product with 0A to 0B cost of its limiting product will be ABQH, and its marginal revenue of a product will be ABQH - NHPM. “Applying additional quantity of work, - marks E.Chemberlin, - the businessman is conformed without delay with last, rather than with the first, and from here follows, that he never will consider profitable and will often consider impossible to pay for itself to factors (to any of them) cost of their limiting products... It is necessary to come to conclusion, what even the most insignificant element of monopoly with necessity reduces payment of all factors taken in this or that firm, below cost of their limiting products” [In the same place. S.231-232]. Thus the share paid to the holder of each factor at distribution, deviates a limiting product always in one party - it always less. “Business looks so, that each factor makes more than receives, and thus, however, does not remain anything superfluous after all of them have received the payment” [In the same place. With. 232]. How E.Chemberlin allows the given contradiction? It finds the answer in process of comparison of conditions of a pure and monopolistically competitiveness. At a pure competitiveness “cost of a limiting product and a product marginal revenue are equal, and all sum paid to factors, exactly will be equal to the total income which is subject to distribution” [In the same place. With. 233]. In conditions of a monopolistically competitiveness because the demand curve deviates a horizontal more and more, “the divergence between limiting products and product marginal revenues increases. The sum last still keeps within a total product; the sum of the first exceeds it more and more. Certainly, if curves of demand for products of any firm lay above curve costs such firm receives exclusive profit, and it speaks about possibility a little to lift incomes of hired factors, perhaps, even to level of cost of their limiting products. However even here it is impossible, that all factors have been paid at a rate of the limiting products: hired factors would win at the expense of a share forming profit ”; however in this case« the factor "business" would receive now... It is less than... A product marginal revenue »[In the same place. podch. Us. - Century B]. Passing to a question on “work operation” at a monopolistically competitiveness, E, Chamberlin says, that, as well as A.Pigu, understands as this term position at which the wages are less, than the limiting natural product of work evaluated for its sale price. But, - the American economist underlines, - such definition approaches only to conditions of a pure competitiveness at which there is no exclusive profit. In the conditions of a pure competitiveness there is a possibility to pay work and all factors at a rate of a total value of their limiting products. In these conditions if work receives less costs of its limiting product, employers really put a part of the income brought by the limiting worker in the pocket. But the made definition of "operation" does not approach for a monopolistically competitiveness where such conditions are not observed. « Here all factors "are necessarily maintained". To avoid charge in "operation", employers should go on bankruptcy. »[In the same place. With. 234]. Thus, E.Chemberlin believes inapplicable to conditions of a monopolistically competitiveness of concept of the "operation" used at research of a pure competitiveness. And from here follows, that the orthodox theory of a limit of efficiency of factors of production is not suitable for the analysis of a monopolistically competitiveness in which conditions the principle «“ a limit of efficiency ”acts at a monopolistically competitiveness» [In the same place. With. 239]. But there can be “a crushing blow”, - according to E.Chemberlina, - which the monopolistically competitiveness puts under the old theory of productivity, “proceeds from advertising and sales costs. Such costs... Are absolutely incompatible with a pure competitiveness. Not surprisingly therefore, that incomes of the factors taken in sphere of marketing activity, do not find in this theory in general any explanation” [In the same place. With. 236]. Formation of these incomes could be investigated, previously having revealed and having measured elements participating here [See: In the same place. With. 238], that in «the Theory of a monopolistically competitiveness» E.Chemberlin did not put to itself a direct problem. If the added schedule in new last aspect - a principle of a limit of efficiency - remains, it is necessary to increase numbering of all other schedules (in chapters 3-4) per unit of!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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A source: BELOZERTSEV V.I.. ORIGIN of THEORIES of the IMPERFECT COMPETITIVENESS (ON the EXAMPLE of ECONOMIC DOCTRINE E.CHEMBERLINA And DZH.ROBINSON). 2003

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