chapter  Three
12 Pages

The Making of Imperfect Competition

Ideas have distinct and memorable origins in Cambridge lore. Austin Robinson discussed his student Charles Gifford's work on "what we subsequently called a marginal revenue curve," and this discussion led to the writing of The Economics of Imperfect Competition. Using the new concept of marginal revenue, Robinson introduced "imperfect competition." Perfect competition entails markets where the number of sellers is large, so that the output of any one seller constitutes a negligible proportion of the total output and furthermore, buyers are indifferent to any choice between sellers. Joan Robinson believed she had undermined the whole argument by economists that workers in a capitalist society receive a fair wage. In the historical context, economists, particularly the Austrian school, had reacted strongly to Marx's nineteenth-century challenge to the fairness of the capitalist system.