Competitive pricing is a pricing rule that combines two principles that are present in competitive markets. The profit principle (an action will be chosen only if it yields maximal payoffs), and the scarcity principle (markets make expensive those commodities that restrict production possibilities). It is shown that, under standard assumptions, these principles imply profit maximization at given prices. But also that they can be applied to economies with non-convex production sets (e.g. firms with S-shaped production functions). The chief properties of this pricing rule, as well as the existence and efficiency of the associated equilibria, are analyzed
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Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number
07.08.
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