A Revised Classification of Forms of Competition

In the present stage of development of economic theory there is found even at the most elementary level a general theory for pure competition, for monopolistic competition, and for monopoly, but there is not to be found anywhere a general theory of oligopoly or circularity. Thus, there is a general theory for all branches of the modern classification of types of competition except one branch, namely, oligopoly. The explanation given for the absence is that a rival's possible reactions to price or output alterations by some particular firm are unlimited in number; there are indeed many oligopoly or circularity theories—a theory for each of many sets of specific assumptions. It is not the purpose of this essay to set forth a general theory of oligopoly, but rather to move in the direction of a general classification of forms of competition. An attempt is made to retain one special characteristic of Professor Chamberlin's work viz., that of proceeding by degrees from one extreme to another, a characteristic Professor Chamberlin achieved with his “number of firms” and “degree of product differentiation.” At the same time it is attempted to break up oligopoly situations; thus, for example, “leadership oligopoly” is as distinct from “collusive oligopoly” as it is from pure competition, or as monopolistic competition is from pure competition.