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Elizabeth J. Jensen

In: 21st Century Economics: A Reference Handbook

Chapter 12: Imperfectly Competitive Product Markets

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Imperfectly Competitive Product Markets
Imperfectly competitive product markets

Any introductory course in microeconomics spends a considerable amount of time examining perfectly competitive markets. It is important to understand this model; it serves as a benchmark for examining other industry structures and the welfare consequences of moving away from perfect competition. However, it is also important to look at imperfectly competitive output markets—markets in which products are not perfectly homogeneous or in which there are only a few sellers. While the perfectly competitive model assumes a large number of buyers and sellers, each of which is a price taker, the monopoly model assumes the opposite: one seller with complete control over price. Structurally, most markets are neither perfectly competitive nor monopolistic; they fall somewhere in between these ...

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