Robins’s Imperfect Competition Theory

Robinson's Imperfect Competition Theory

Mrs. Joan Robinson (b. 1903) in 1933 published The Economics of Imper­fect Competition ostensibly to show that output and price of a single commodity can be determined by a technique based on assumption of rational decision by an individual enterpriser, conditioned only by a demand that is beyond his control and by his own expenses (other than selling). One aim was to show the limitations of a theory of value and distribution based on the assumption of either perfect competition or perfect monopoly. She considers monopoly merely as the opposite of competition, and states that each seller has a monopoly of his own product. It is just one of many conditions which in varying degrees make actual competition imperfect. She proposes, therefore, to modify the theory of value and distribution based on perfect competition by reconstructing demand and supply curves so that they may show the effects of various imperfections in competition.

Thus Mrs. Robinson's approach is based on that of Alfred Marshall. It is doubtful that the "imperfect competition" epi­sode would have occurred had the leader of Neo-Classicism not himself been disturbed by so many difficulties, and left so many loopholes.

She considers each industry as concerned with one product which is essentially homogeneous.
Mrs. Robinson also starts with a single firm, and deals with its calculated endeavor to adjust its output to its demand curve.

But her emphasis is on the marginal revenue curve, the equaliza­tion of which with the marginal cost curve she regards as the main problem. This emphasis is probably somewhat excessive, in view of the fact that the "marginal" aspect is merely a deriva­tive of the total or average revenue. Moreover, the treatment confuses (1) the time series of varying total sales (or expenses) for a single firm with (2) the schedules of bids (or asked prices) for a market at a given time.

Mrs. Robinson discusses various conditions limiting the demand curve of an individual firm, such as monopoly and com­petition of varying degrees, and considers price policies, quality, and service. She also discusses conditions affecting the firm's supply curve, such as increasing, decreasing, or constant cost. (She uses the long-run Marshallian declining cost curve as rep­resenting the market supply curve.)

Considerable attention is given to conditions that lead indi­vidual firms to make discriminatory prices.
She does not cover oligopoly and selling costs in her analysis, but goes beyond Chamberlin in treating of buyer's monopoly, and monopsony. This case she considers as represented by the enterpriser's buying of labor, concluding that labor is '' exploited," in that (under the conditions she assumes) it does not get the full market value of its specific marginal product.

B= average cost (including rent)
AR= average revenue
α=marginal cos
MR=marginal revenue
OM=monopoly output
OQ=competitive output
DQ=competitive price
PM=monopoly price
C=intersection of marginal revenue and marginal cost