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TYPES OF COMPETITION AND THE THEORY OF

STRATEGY: TOWARD AN INTEGRATIVE


FRAMEWORK

Marium Shahid
MBA-P

TYPES OF COMPETITION AND THE THEORY OF


STRATEGY: TOWARD AN INTEGRATIVE FRAMEWORK
Abstract
Three concepts of competition, each reflecting different research
traditions in microeconomics, are discussed: Industrial Organization
competition .Chamberlinian competition, and Schumpeterian
competition. The implications of each for normative theories of
strategy are discussed, and a single framework which describes the
types of competitive forces a firm is likely to face over time is
suggested.

Firms can apply in choosing strategies that generate high returns


on investment.
Microeconomics is closely likely linked with the study of
competition.
The concept of competition is not unambiguous as it is used in
microeconomics.
Most usages of the concept that either have been already used by
strategy theorists,
Or seem likely to be used in the near future.

INDUSTRIAL ORGANIZATION
COMPETITION

CHAMBERLINIAN
COMPETITION
Definition
Chamberlinian economics begins with a focus on the unique assets and
capabilities of individual firms.
For Chamberlinain and his contemporaries ,competition in industries always goes
forward between firms with different, though perhaps overlapping.
InChamberlinianmonopolisticcompetitioneach firm has some monopoly power,
but entry drives monopoly profits to zero. Theconcept gets its name from
EdwardChamberlin. One example where
Chamberlinianmonopolisticcompetitioncan be experienced is the book market.
Competition within an industry has many of the characteristics of perfect
competition, as it has been described in neoclassical microeconomics.

MAIN CONCLUSIONS
Chamberlins monopolistic competition model analyses a whole
new market structure, apart from the classic monopoly and perfect
competition. It demonstrates that in a market the number of firms
can be irrelevant, and perfectly competitive results can be reached.
In fact, in terms ofwelfare andProduct differencation ,
monopolistic competition is desirable.
Its worth mentioning that these results are similar to those of
William Baumolscontestable markets , since the number of firms
in the market does not necessarily determine how competitive it is.
Also, the results are contrary to the results found inBertrands
duopoly model.

SCHUMPETERIAN
COMPETITION
INTRODUCTION
Schumpeter assumes a perfectly competitive economy which is in

stationary equilibrium. In such a stationary state ,there is perfect


competitive equilibrium. no profits, no interest rates, no savings, no
investments and no involuntary unemployment. This equilibrium is
characterized by the term circular flow, continues to repeat itself
every year.
Development consists in the carrying out of new combinations for
which possibilities exist in the stationary state. New combinations
come about in the form of INNOVATIONS

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