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    On Efficiency of Production Under Imperfect Competition

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    anne marlaine magbanua
    This document provides an annotated bibliography on the theories of imperfect competition proposed by Greenhut, Demsetz, and Dewey. It summarizes Greenhut's proposition that imperfect competition can lead to efficient outcomes through free entry and exit of firms. It also discusses Demsetz and Dewey's alternative theories and objections to Greenhut's model, focusing on assumptions about average revenue curves and the effects of firm mergers. The document concludes that imperfect competition does not necessarily result in inefficient production, contrary to claims made by Robinson and Chamberlin.

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    On Efficiency of Production Under Imperfect Competition

    Uploaded by

    anne marlaine magbanua
    22 views2 pages
    This document provides an annotated bibliography on the theories of imperfect competition proposed by Greenhut, Demsetz, and Dewey. It summarizes Greenhut's proposition that imperfect competition can lead to efficient outcomes through free entry and exit of firms. It also discusses Demsetz and Dewey's alternative theories and objections to Greenhut's model, focusing on assumptions about average revenue curves and the effects of firm mergers. The document concludes that imperfect competition does not necessarily result in inefficient production, contrary to claims made by Robinson and Chamberlin.

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    This document provides an annotated bibliography on the theories of imperfect competition proposed by Greenhut, Demsetz, and Dewey. It summarizes Greenhut's proposition that imperfect competition can lead to efficient outcomes through free entry and exit of firms. It also discusses Demsetz and Dewey's alternative theories and objections to Greenhut's model, focusing on assumptions about average revenue curves and the effects of firm mergers. The document concludes that imperfect competition does not necessarily result in inefficient production, contrary to claims made by Robinson and Chamberlin.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    22 views2 pages

    On Efficiency of Production Under Imperfect Competition

    Uploaded by

    anne marlaine magbanua
    This document provides an annotated bibliography on the theories of imperfect competition proposed by Greenhut, Demsetz, and Dewey. It summarizes Greenhut's proposition that imperfect competition can lead to efficient outcomes through free entry and exit of firms. It also discusses Demsetz and Dewey's alternative theories and objections to Greenhut's model, focusing on assumptions about average revenue curves and the effects of firm mergers. The document concludes that imperfect competition does not necessarily result in inefficient production, contrary to claims made by Robinson and Chamberlin.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    1

    Annotated Bibliography

    Ohta H. (1976). On Efficiency of Production under Conditions of Imperfect Competition.

    Southern Economic Journal, 43(2), 1124-1135.https://doi.org/10.2307/1057337 In light

    of the recent article that Greenhut M.L. that M.L. Greenhut has launched a new edition of

    his theory of imperfect competition and presents a brief presentation, as well as the clear

    reorganization of his same original proposition which states that imperfect competition

    leads the market results isomorphic to perfectly competitive outcomes Demetz, on the

    other hand, claims that this theory is incorrect and argues that “efficiency in production

    can prevail if what he calls an average revenue (MAR) curve is bell-shaped.” Dewey on

    the other hand also disagrees, he claimed that excess capacity would be “eliminated by

    the rationalization process.” Contrary to Dewey, Greenhut proposes that “free entry, exit,

    and relocation of firms, competition rather than a merger, will yield a stable, unique, and

    efficient tangency equilibrium under oligopolistic condition.” This paper will provide an

    articulate view of the new evidence of Greenhut's proposition regarding a certain

    behavioral assumption and related theories of Demetz and Dewey that requires initial

    examination to give us an understanding that imperfect competition firms will produce

    efficiently in comparison to the perfect competitor. Demetz's theory recognized that

    average revenue is the result of a firm's product profits determined by the cost of sales

    promotion. And each level of selling costs produces a different average revenue; the

    firm's revenue ultimately has become a function of its selling costs S along with the

    quantity Q supplied. Dewey, on the other hand, suggested two alternative models for
    imperfect competition that will demonstrate that

    Chamberlinian tangency will not always lead to stable non-Chanbelinean equilibrium. In

    his solution, he uses firm mergers rather than average revenue and average cost.

    Greenhut's revised prior proposition focuses on the entry, exit, and relocation processes

    required for the required movement to the unique-stable equilibrium tangency point. He

    makes the following fundamental assumptions: (a) a homogeneous buyer community is

    equitably spread across an economic space.; (b) homogeneous firms are concentrated in

    the same particular region, and (c) these firms are also subject to intralocal and interlocal

    competition.

    Demsetz's objections are rather deceptive; after all, the shape of MAR is not required to

    be bell-shaped in order to come to Demsetz's conclusion. Dewey's final proposition is

    perplexing because it contradicts his fundamental assumption. Nonetheless, Dewey

    claims that it reflects production efficiency, as one merged firm can produce any given

    product more cheaply than two firms (or n firms) working independently. According to

    Greenhut's model, free entry eliminates excess profits, whereas exit can be characterized

    by changes in firm size and location.

    The Robinson-Chamberlin claim that imperfect competition most likely leads to

    inefficient production was overplayed, as we see Demestz, Dewey, and Greenhut refute

    indicates that imperfect competition does not technically result in inefficient

    production.

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