Edward Hastings Chamberlin (May 18, 1899 – July 16, 1967) was an American economist, known for his theories on industrial monopolies and imperfect competition. He is regarded as one of the most influential American economists of the mid-twentieth century. His book Theory of Monopolistic Competition (1933), along with Joan Robinson’s The Economics of Imperfect Competition (1933), started what is known as the monopolistic competition revolution. Chamberlin's book provided insights into competitive markets noting the importance of factors as product differentiation, the advantages of location, advertising, and brand preference.
With his work Chamberlin indebted us with important knowledge of economic science, understandings that in their application have served many businesses well as they seek to gain and satisfy customers. Such applications of Chamberlin's ideas help suppliers and consumers interact to the satisfaction of both, an important step in the establishment of a society of harmony and prosperity.
Edward Chamberlin was born in on May 18, 1899, La Conner, Washington. He studied first at the University of Iowa (where he was influenced by Frank H. Knight), then pursued graduate-level studies at the University of Michigan, eventually receiving his Ph.D. from Harvard University in 1927. His dissertation dealt with imperfect competition and was supervised by Allyn Young.
For most of his career Edward Chamberlin taught economics at Harvard (1937-1967). He served as chair of the economic department during its ‘golden age’ (1939–1943) when it included several renowned economists, including Joseph Schumpeter, Alvin Hansen, Seymour Harris, Sumner Slichter, and Wassily Leontief.
Chamberlin published his book The Theory of Monopolistic Competition in 1933, the same year that Joan Robinson published her book on the same topic: The Economics of Imperfect Competition. Chamberlin however saw his idea unique and has spent the most of his career defending it and trying to differentiate it from Robinson’s.
Chamberlin died on July 16, 1967, in Cambridge, Massachusetts.
Chamberlin’s most significant contribution was the theory of monopolistic competition. In 1933, Chamberlin published his book The Theory of Monopolistic Competition, an outgrowth of his PhD dissertation at Harvard in 1927. In the same year Joan Robinson published her book on the same topic: The Economics of Imperfect Competition, so these two economists can be regarded as the parents of the modern study of imperfect competition.
Chamberlin conducted numerous experiments on imperfect markets at Harvard University, in which he used his students as subjects. He found out that the number of items sold was consistently higher in the situation of "imperfect" markets than would have been in the case if the markets were "perfect." He also noticed that the average price was consistently lower than their equivalents in perfect markets. He found it puzzling, and concluded that the biased behavior of his students caused that to happen.
Based on his experiments, Chamberlin concluded that even though the situation on the market may look like that of pure competition, where a large number of buyers and sellers participate in economic games, in reality it is far from that. He wrote: "[a]ny thing which makes buyers prefer one seller to another, be it personality, reputation, convenient location, or the tone of his shop," will skew the situation of pure competition (p.8). In addition:
Chamberlin coined the term "product differentiation" to describe how a supplier may be able to charge a greater amount for a product than perfect competition would allow. Product differentiation simply means the process by which sellers try to distinguish their products from others by making them more attractive to particular buyers. Brand names are a typical example of product differentiation, where physical products are often very similar, while the brand name is what makes the products distinct.
Chamberlin spent the rest of his career trying to differentiate his theory of monopolistic competition from Joan Robinson’s theory of imperfect competition, and in defending it against the Chicago School and other critics. He published his Towards a More General Theory of Value in 1957, a collection of essays on monopolistic competition.
Edward Chamberlin is regarded as one of the most influential American economists of the mid-twentieth century. His book Theory of Monopolistic Competition (1933), along with Robinson’s The Economics of Imperfect Competition (1933), started what is known as the monopolistic competition revolution. The book discussed such factors as product differentiation, the advantages of location, advertising, and brand preference, which still occupy a central point in modern economic theory.
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