Pre-marginalism
In the writings of the so-called pre-marginalists the foundations are laid for competition considered as the specific market structure in which prices rapidly converge towards production costs.
They determined the equilibrium prices and quantities in monopoly and duopoly markets. Before looking at the thought of Antoine-Augustin Cournot, who can be credited with most of the formal basis of the discipline, the pioneering contribution to urban economics made in 1826 by Johann Heinrich von Thunen should be mentioned, although today spatial economics no longer belongs to IO, but to economic geography. In 1838 Cournot started his analysis with the monopolist profit-maximization problem, then elaborated a duopoly model in which firms compete in quantity. Adding more firms to his model, he showed that “unlimited” competition (concurrence indefinie) is reached if the number of firms becomes infinite. He also stated that, if the marginal cost function is decreasing, a monopoly will occur. The pre-marginalist era was dominated by engineereconomists (Ekelund and Hebert 1999): in 1839 Charles Ellet developed a duopoly model with price conjectures; in 1844 Jules Dupuit calculated the deadweight loss due to monopoly pricing, initiated the theory of price discrimination, indicated a number of deterrents to entry in the transport sector, and identified the transport network as a natural monopoly (Mosca 1998); in 1850 Dionysius Lardner represented the model of monopoly profit maximization in a diagram. The lawyer Edwin Chadwick must also be mentioned here for proposing and supporting (in 1859) the principle of “competition for the field” (competitive bedding) in those cases where competition within the market was considered impossible.