Profit Maximization, Industry Structure, and Competition: A critique of neoclassical theory
Neoclassical 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.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Keen, Steve, 2004. "Deregulator: Judgment Day for microeconomics," Utilities Policy, Elsevier, vol. 12(3), pages 109-125, September.
- Fernando Vega-Redondo, 1997.
"The Evolution of Walrasian Behavior,"
Econometric Society, vol. 65(2), pages 375-384, March.
- Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- George J. Stigler, 1957. "Perfect Competition, Historically Contemplated," Journal of Political Economy, University of Chicago Press, vol. 65, pages 1-1. Full references (including those not matched with items on IDEAS)