Profit maximization, industry structure, and competition: A critique of neoclassical theory

Keen, Steve and Standish, Russell (2006) Profit maximization, industry structure, and competition: A critique of neoclassical theory. Physica A: Statistical Mechanics and its Applications, 370(1), pp. 81-85. ISSN (online) 1873-2119

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Abstract

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.

Item Type: Article
Additional Information: doi: DOI: 10.1016/j.physa.2006.04.032
Uncontrolled Keywords: Microeconomics Profit maximization Competition Monopoly Oligopoly Cournot-Nash game theory
Research Area: Economics and econometrics
Faculty, School or Research Centre: Faculty of Arts and Social Sciences (until 2017) > School of Economics, History and Politics (from November 2012)
Depositing User: Stephen Keen
Date Deposited: 24 Feb 2015 16:27
Last Modified: 24 Feb 2015 16:27
URI: http://eprints.kingston.ac.uk/id/eprint/30224

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