Download or read book Product Differentiation and Demand Elasticity written by Richard L. Carson and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper argues that product differentiation is compatible with perfect competition under free entry and exit and small firm size relative to size of market. Despite Chamberlin's view, monopolistic competitors are price takers, even though each firm's product has no perfect substitute. There is a difference between perfect competition with product homogeneity and perfect competition with differentiated products, however. Advertising can pay off with differentiated products because products have separate identities--and price depends on quality--even though firms are price takers for any given quality. A differentiated oligopoly may resemble monopolistic competition a la Chamberlin in some ways.