Profit maximization, industry structure, and competition: A critique of neoclassical theory
AbstractNeoclassical economics has two theories of competition between profit-maximizing firms—Marshallian and Cournot–Nash—that start from different premises about the degree of strategic interaction between firms, yet reach the same result, that market price falls as the number of firms in an industry increases. The Marshallian argument is strictly false. We integrate the different premises, and establish that the optimal level of strategic interaction between competing firms is zero. Simulations support our analysis and reveal intriguing emergent behaviors.
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Bibliographic InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 370 (2006)
Issue (Month): 1 ()
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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/
Microeconomics; Profit maximization; Competition; Monopoly; Oligopoly; Cournot–Nash game theory;
Other versions of this item:
- Steve Keen & Russell K. Standish, 2006. "Profit Maximization, Industry Structure, and Competition: A critique of neoclassical theory," Papers nlin/0604061, arXiv.org.
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