Address Models of Value Theory

This paper presents an approach to the theory of monopolistic competition which owes a particular intellectual debt to Gorman (1980), Kaldor (1934; 1935) and Lancaster (1966). Our interest is in deriving testable hypotheses from partial equilibrium analysis. Some simple conceptual experiments, in conjunction with some awkward facts, lead us to take strong positions concerning the appropriate demand and cost primitives. The choice of primitives has important implications for the concept and the properties of equilibrium. We hope that the approach presented here is coherent; but it has to be said that the analysis has not been completed, by ourselves or anyone else. Part of our purpose is accordingly to note unsolved problems, and generate an agenda for further research. At some points we are able only to offer a conjecture as to what the results of further research may be. We confine ourselves throughout to the market for consumer goods (Chamberlin’s, 1933, problem) and do not consider the markets for capital, labour or intermediate goods.