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CHAPTER
16
Monopolistic Competition
독점적 경쟁
Economics
PRINCIPLES OF
N. Gregory Mankiw
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by Ron Cronovich
© 2009 South-Western, a part of Cengage Learning, all rights reserved
In this chapter,
look for the answers to these questions:
 What market structures lie between perfect competition
and monopoly, and what are their characteristics?
완전경쟁과 독점 사이에는 어떤 시장구조가 있으며 그 특징은 무엇인가?
 How do monopolistically competitive firms choose price
and quantity? Do they earn economic profit? 독점적 경쟁
기업들은 어떻게 가격과 수량을 결정하는가? 그들은 경제적 이윤을 얻는가?
 In what ways does monopolistic competition affect
society’s welfare? 독점적 경쟁 기업들은 사회후생에 어떻게 영향을
주는가?
 What are the social costs and benefits of advertising?
광고의 사회적 비용과 편익은 무엇인가?
1
Introduction:
Between Monopoly and Competition
Two extremes 양 극단
 Perfect competition: many firms, identical products
 Monopoly: one firm
In between these extremes: imperfect competition 양 극단의
사이가 불완전경쟁
 Oligopoly: only a few sellers offer similar or identical
products. 소수의 기업들이 유사하거나 동일한 제품을 판매
 Monopolistic competition: many firms sell similar but
not identical products.
수많은 기업들이 유사하지만 동일하지
않은 제품을 판매
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Characteristics & Examples
of Monopolistic Competition
Characteristics: 특징
 Many sellers 다수의 판매자
 Product differentiation 제품 차별화
 Free entry and exit 자유로운 진입과 퇴출
Examples:
 apartments
 books
 bottled water
 clothing
 fast food
 night clubs
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Comparing Perfect & Monop. Competition
Perfect
competition
Monopolistic
competition
number of sellers
many
many
free entry/exit
yes
yes
long-run econ. profits
zero
zero
the products firms sell
identical
differentiated
firm has market power? none, price-taker
yes
D curve facing firm
downwardsloping
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horizontal
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Comparing Monopoly & Monop. Competition
Monopoly
Monopolistic
competition
number of sellers
one
many
free entry/exit
no
yes
long-run econ. profits
positive
zero
firm has market power?
yes
yes
D curve facing firm
downwarddownwardsloping
sloping
(market demand)
close substitutes
none
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many
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A Monopolistically Competitive Firm
Earning Profits in the Short Run
The firm faces a
downward-sloping
D curve. 수요곡선은 우하향
Price
profit
At each Q, MR < P.
To maximize profit, firm
produces Q where MR
= MC. 이윤극대화 조건
ATC
P
ATC
D
The firm uses the
D curve to set P.
수요곡선을 이용, 가격 결정
MONOPOLISTIC COMPETITION
MC
MR
Q
Quantity
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A Monopolistically Competitive Firm
With Losses in the Short Run
For this firm, P < ATC
at the output where
MR = MC. 한계수입과
Price
MC
한계비용이 같을 때 가격보다
평균비용이 높다
The best this firm can
do is to minimize its
losses. 기업이 할 수 있는
losses
ATC
ATC
P
최선은 손실을 최소화하는 것
D
MR
Q
MONOPOLISTIC COMPETITION
Quantity
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Monopolistic Competition and Monopoly
 Short run: Under monopolistic competition, firm behavior
is very similar to monopoly. 독점적 경쟁 하에서 단기적으로 기업의
행동은 독점과 매우 유사
 Long run: In monopolistic competition, entry and exit drive
economic profit to zero. 진입과 퇴출로 인해 장기적으로 이윤은 0
 If profits in the short run: 단기적으로 이윤이 나면
New firms enter market, 신규기업이 시장에 진입하고
taking some demand away from existing firms,
prices and profits fall. 기존기업의 수요를 빼앗아 가격과 이윤 하락
 If losses in the short run: 단기적으로 손실이 나면
Some firms exit the market, 일부 기업이 시장을 떠나고
remaining firms enjoy higher demand and prices.
남은 기업들의 수요와 가격은 상승
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A Monopolistic Competitor in the Long Run
Entry and exit occurs
until P = ATC and
profit = zero. 진입과
퇴출은 이윤이 0이 될
때까지 발생
Notice that the firm
charges a markup of
price over marginal
cost and does not
produce at minimum
ATC. 가격은 한계비용
Price
MC
ATC
P = ATC
markup
보다 높게 받고, 생산량은
평균총비용의 최저가 아님
MONOPOLISTIC COMPETITION
D
MC
MR
Q
Quantity
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Why Monopolistic Competition Is
Less Efficient than Perfect Competition
1. Excess capacity 초과설비
 The monopolistic competitor operates on the
downward-sloping part of its ATC curve,
produces less than the cost-minimizing output.
독점적 경쟁 기업은 최저 (평균총)비용 생산량보다 적게 생산
 Under perfect competition, firms produce the quantity
that minimizes ATC. 완전경쟁에서는 평균총비용 최저에서 생산
2. Markup over marginal cost 한계비용 이상으로 가격 올리기
 Under monopolistic competition, P > MC.
 Under perfect competition, P = MC.
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Monopolistic Competition and Welfare
 Monopolistically competitive markets do not have all the
desirable welfare properties of perfectly competitive
markets. 독점적 경쟁 시장이 완전경쟁 시장의 바람직한 특성을 모두
가지는 것은 아니다.
 Because P > MC, the market quantity is below the
socially efficient quantity. 가격이 한계비용보다 크므로 시장
거래량은 사회적으로 바람직한 수준보다 적다.
 Yet, not easy for policymakers to fix this problem: Firms
earn zero profits, so cannot require them to reduce prices.
그러나 정책당국이 이 문제를 해결하는 것은 쉽지 않으니, 기업들의 이윤이
0이므로 가격을 내리도록 요구할 수가 없기 때문이다.
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Monopolistic Competition and Welfare
 Number of firms in the market may not be optimal, due to
external effects from the entry of new firms: 신규진입에 따른
외부효과로 인해 시장에 존재하는 기업의 수는 최적이 아닐 수 있다.
 The product-variety externality: 제품 다양화 (외부)효과

surplus consumers get from the introduction of new
products
The business-stealing externality: 시장탈취 (외부)효과
losses incurred by existing firms when new firms enter
market
 The inefficiencies of monopolistic competition are subtle
and hard to measure. No easy way for policymakers to
improve the market outcome. 독점적 경쟁의 비효율성은 미묘하고
측정하기도 어려워서, 정책당국이 시장성과를 개선하는 것은 쉽지가 않다.
MONOPOLISTIC COMPETITION
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ACTIVE LEARNING
1
Advertising
1. So far, we have studied three market structures:
perfect competition, monopoly, and
monopolistic competition. In each of these,
would you expect to see firms spending money
to advertise their products? Why or why not?
2. Is advertising good or bad from society’s
viewpoint? Try to think of at least one “pro”
and “con.”
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Advertising
 In monopolistically competitive industries, product
differentiation and markup pricing lead naturally to the
use of advertising. 독점적 경쟁 산업에서는 제품차별화와 가격
올리기로 인해 자연스럽게 광고를 하게 된다.
 In general, the more differentiated the products, the more
advertising firms buy. 일반적으로, 제품이 차별화될수록 기업들은 더
많은 광고를 한다.
 Economists disagree about the social value of advertising.
경제학자들은 광고의 사회적 가치에 대해 의견이 일치하지 않는다.
MONOPOLISTIC COMPETITION
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The Critique of Advertising
 Critics of advertising believe: 광고에 대한 비판론
 Society is wasting the resources it devotes to
advertising. 사회는 광고에 쏟는 자원을 낭비하고 있다.
 Firms advertise to manipulate people’s tastes. 기업들이
사람들의 취향을 조작하기 위해 광고를 한다.
 Advertising impedes competition –
광고는 경쟁을 억제한다.
it creates the perception that products are more
differentiated than they really are, allowing higher
markups. 광고는 제품이 실제보다 더 차별화되어 있다는 인식을
심어 더 높은 가격 올리기가 가능하게 한다.
MONOPOLISTIC COMPETITION
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The Defense of Advertising
 Defenders of advertising believe: 광고에 대한 옹호론
 It provides useful information to buyers. 구매자들에게
유용한 정보를 제공한다.
 Informed buyers can more easily find and exploit
price differences. 정보를 가진 구매자들은 가격격차를 더 쉽게
발견하고 이용할 수 있다.
 Thus, advertising promotes competition and reduces
market power. 그러므로 광고는 경쟁을 촉진하고 시장지배력을
떨어뜨린다.
 Results of a prominent study:
Eyeglasses were more expensive in states
that prohibited advertising by eyeglass makers
than in states that did not restrict such advertising.
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Advertising as a Signal of Quality
A firm’s willingness to spend huge amounts on advertising
may signal the quality of its product to consumers, regardless
of the content of ads.
 Ads may convince buyers to try a product once, but the
product must be of high quality for people to become
repeat buyers.
 The most expensive ads are not worthwhile unless they
lead to repeat buyers.
 When consumers see expensive ads, they think the
product must be good if the company is willing to spend
so much on advertising.
MONOPOLISTIC COMPETITION
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Brand Names
 In many markets, brand name products coexist with
generic ones. 많은 시장에서 브랜드 (이름) 제품과 일반 제품이
공존한다.
 Firms with brand names usually spend more on
advertising, charge higher prices for the products. 브랜드를
가진 기업은 대체로 광고비를 더 많이 지출하고 제품 가격도 높다.
 As with advertising, there is disagreement about the
economics of brand names… 광고처럼 브랜드의 경제학에
대해서도 의견이 일치하지 않는다.
MONOPOLISTIC COMPETITION
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The Critique of Brand Names
 Critics of brand names believe: 브랜드 이름에 대한 비판론
 Brand names cause consumers to perceive
differences that do not really exist. 브랜드는 소비자들로
하여금 실제로 존재하지 않는 차이를 느끼게 한다.
 Consumers’ willingness to pay more for brand names
is irrational, fostered by advertising. 브랜드에 대한
소비자들의 더 높은 지불용의는 비합리적이며, 광고가 이를 촉진한다.
 Eliminating govt protection of trademarks would
reduce influence of brand names, result in lower
prices. 상표에 대한 정부 보호를 제거하면 브랜드의 영향을 감소시켜
가격 하락을 초래할 것이다.
MONOPOLISTIC COMPETITION
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The Defense of Brand Names
 Defenders of brand names believe: 브랜드에 대한 옹호론
 Brand names provide information about quality to
consumers. 브랜드 이름은 소비자들에게 품질에 대한 정보를
제공한다.
 Companies with brand names have incentive to
maintain quality, to protect the reputation of their
brand names. 브랜드를 가진 기업들은 자사 브랜드의 평판을
지키기 위해 품질을 유지하려는 경제적 유인을 가진다.
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CONCLUSION
 Differentiated products are everywhere; examples of
monopolistic competition abound. 차별화된 제품은 도처에
있어서 독점적 경쟁의 사례를 우리 주변에서 찾을 수 있다.
 The theory of monopolistic competition describes many
markets in the economy, yet offers little guidance to
policymakers looking to improve the market’s allocation
of resources. 독점적 경쟁 이론은 경제 내의 많은 시장을 설명하지만
시장의 자원배분을 개선하려는 정책당국에게 별다른 지침을 주지는 못한다.
MONOPOLISTIC COMPETITION
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CHAPTER SUMMARY
 A monopolistically competitive market has
many firms, differentiated products, and free entry.
 Each firm in a monopolistically competitive market
has excess capacity – produces less than the
quantity that minimizes ATC. Each firm charges a
price above marginal cost.
22
CHAPTER SUMMARY
 Monopolistic competition does not have all of the
desirable welfare properties of perfect competition.
There is a deadweight loss caused by the markup
of price over marginal cost. Also, the number of
firms (and thus varieties) can be too large or too
small. There is no clear way for policymakers to
improve the market outcome.
23
CHAPTER SUMMARY
 Product differentiation and markup pricing lead to
the use of advertising and brand names. Critics of
advertising and brand names argue that firms use
them to reduce competition and take advantage of
consumer irrationality. Defenders argue that firms
use them to inform consumers and to compete
more vigorously on price and product quality.
24