Chamberlain on Product Differentiation, Market Structure and Competition: An essay

In the 1930s the imperfect competition - monopolistic competition debate took new approaches to the analysis of economic equilibrium with two main works which derived independently came published almost simultaneously in time: Mrs. Robinson’s Economics of Imperfect Competition [1933] and Chamberlin’s Theory of Monopolistic Competition [1933]. They face the competitive structure in completely different ways in aim, methodology and content. His work can be considered revolutionary in the sense that he consideres a market structure characterized by both competitive and monopoly elements and this is the “little” difference that made his work so important to the modern microeconomic theory with so important concepts such as product differentiation, the role of advertising and the randomness associated to the choice process: with Chamberlin, advertizing and product differentiation lead to new market structures, opening up field of industrial organization. Two dimensions are enormously relevant: product differentiation linked to selling costs (advertising, non-price competition, etc.) and numbers (includes oligopoly and competition linked to large numbers, even if demand curves not horizontal).