IS THERE EXCESS CAPACITY REALLY? Cover Image
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IS THERE EXCESS CAPACITY REALLY?
IS THERE EXCESS CAPACITY REALLY?

Author(s): Tamara Todorova
Subject(s): Business Ethics
Published by: ASERS Publishing
Keywords: excess capacity; monopolistic competition; oligopoly; transaction costs

Summary/Abstract: Excess capacity is viewed as a distinctive feature and an essential inefficiency of monopolistic competitionas the large-group case of imperfect competition. Using a simple geometrical approach and studying the demand andcost curves faced by the individual firm, we find that there is little potential for excess capacity in monopolisticallycompetitive markets, opposite to the common perception and wide coverage in the literature. We see monopolistic competition as the true type of competition in the presence of transaction costs where perfect competition is a hypothetical and ideal benchmark which cannot exist under positive transaction costs.

  • Issue Year: VI/2015
  • Issue No: 12
  • Page Range: 127-144
  • Page Count: 17
  • Language: English
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