But in 1933 a revolution in the approach to price theory was initiated by the publication of two works of modern economists, Chamberlin and Mrs. Joan Robinson.
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E.H. Chamberlin’s work was entitled “The Theory of Monopolistic Competition” and Mrs. Robinson’s “The Economics of Imperfect Competition”.
Both economists challenged the concept of perfect competition and monopoly as unrealistic and attempted to present a new theory which is more realistic of the two new approaches, the view of Chamberlin’s theory of monopolistic competition received wide acclamation. Critics also regarded Chamberlin’s contribution as novel and superior to that of Mrs. Robinson’s. In fact the real credit goes to Chamberlin for setting a new and realistic trend in the economics value.
Concept of Monopolistic Competition:
Monopolistic Competition refers to the market situation in which there is a keen competition, but neither perfect nor pure, among a group of a large number of small producers or suppliers having some degree of monopoly because of the differentiation of their products. Thus, we can say that monopolistic competition (or imperfect competition) is a mixture of competition and a certain degree of monopoly, on the basis of a correct appraisal of the market situation.
Chamberlin has asserted that monopoly and competition are not mutually exclusive rather both are frequently blend together. In short, we can say that a market with a blending of monopoly and competition is called monopolistic competition or imperfect competition.
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Definition:
1. Monopolistic Competition refers to competition among a large number of sellers producing close but not perfect substitutes for each other.
2. According to Prof. Lerner – “The condition of imperfect competition arises when a seller has to face the falling demand curve.”
3. According to Prof. J. K. Mehta – “It has been more fully realised that every case of exchange is a case of what may be called partial monopoly and partial monopoly is looked at from the other said a case of imperfect competition. There is a blending of both competition element and monopoly element in each situation.”
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4. According to Prof. Leftwich – “Monopolistic Competition (or imperfect competition) is that condition of industrial market in which a particular commodity of one seller creates an idea of difference from that of the other sellers in the minds of the consumers.”