ABSTRACT
In the development of economic theory the theory of monopolistic competition has not, in the event, played the strategic role which might at one time have been anticipated. It has come under particularly severe criticism from the so-called Chicago school of economists who have argued that the development of the theory has added little to economic knowledge. The ancestor of all oligopoly models is that of Augustin Cournot and, while it is now recognised that a realistic approach to problem of oligopoly cannot be based solely upon Cournot’s theory, most explanations of oligopolistic markets owe something to his original work. In addition, static framework of traditional theory is inappropriate to an analysis of oligopolistic markets. The empirical study of markets has revealed ubiquitous nature of oligopolistic markets and large firms – again casting doubt on the assumptions of the theory. New theories have been developed within alternative theoretical frameworks which are believed to be more appropriate to the modern economy.
