A colleague saw the same model-calibrating the elasticity…
“A colleague saw the same model-calibrating the elasticity of demand facing a Cournot oligopolist as a function of the number of firms in the industry--described at the University of Chicago and at M.I.T. A Chicago economist derived the formula and said, "Look at how few firms you need to get close to infinite elasticities and perfect competition." An M.I.T. economist derived the same formula and said, "Look at how large n has to be before you get anywhere close to an infinite elasticity and perfect competition."”
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
Fewer firms increase market elasticity; many firms needed for perfect competition.
In simple terms: Market power diminishes with more competitors.
Key Takeaway
Promote competition for efficient markets.
Themes
economics
competition
elasticity
market structure
oligopoly
Mood
analytical
technical
informative
Type
Chicago:1
Colleagues:0
Competition:1
Demand:0
Economics:1
Economist:0
Elasticity:1
Firm:0
Formulas:0
Function:0
Industry:1
Infinite:0
Looks:0
Models:0
Needs:0
Numbers:0
Perfect:0
Perfect competition:0
Said:0
Saws:0
University:0
Elasticity Demand:0
Economist Derived:0
Infinite Elasticities:0
Competition Economist:0
Oligopolist Function:0
When to use this quote
- policy making
- business strategy
- academic research
Key Concepts
perfect competition
law of demand
industry dynamics
Questions to Reflect On
- How many firms are realistic for a given industry?
- What barriers prevent reaching perfect competition?
A Different Perspective
The model assumes ceteris paribus, ignoring real‑world frictions.