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 InfoPaper provided by arXiv.org in its series Papers with number nlin/0604061.
Date of creation: Apr 2006
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Publication status: Published in Physica A, 370, 81-85 (2006)
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Other versions of this item:
- Keen, Steve & Standish, Russell, 2006. "Profit maximization, industry structure, and competition: A critique of neoclassical theory," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 81-85.
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