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- Title
Reply.
- Authors
Bishop, Robert L.
- Abstract
In this article, the author clarifies some concepts of cross-elasticity of demand and market relationship. He points out the ratio of indices of the homogeneity or heterogeneity of products in the market based on substitution criteria and approximation theory. It is suggested that the total substitutability between isolated products of two different firms, with respect to price flexibility and stability conditions, can be identified by cross-elasticities of demand of that product. It is described that both "total substitutability" and the "individual substitutability" between pairs of products have their own respective significance. The author further emphasizes that a remarkably close approach to pure competition is also consistent with very small cross-elasticities. It is supposed that while high total substitutability is a necessary condition in order that pure competition may be closely approached, high individual substitutability is not.
- Subjects
ELASTICITY (Economics); COMPETITION; SUPPLY &; demand; SUBSTITUTION (Economics); PRICE flexibility; INDUSTRIAL organization (Economic theory)
- Publication
American Economic Review, 1955, Vol 45, Issue 3, p382
- ISSN
0002-8282
- Publication type
Article