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Seminar notes for Competition
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Seminar 4: Competition(a) What do you understand by the term 'competition', as used by non-neoclassical
economists?
Orthodox views:
-static
-price competition
-equilibrium > Market clearing > Supply = Demand
-Pareto efficient
-No surplus
Imperfectionist view:
Perfect Competition - Imperfect Competition - Oligopoly - Monopoly
Pareto efficient — to — Pareto inefficient
Heterodox: (classical/marxism)
-dynamic/historical
-capital mobility
-equilibrium - no market clearing - Profit rate equalisation (weaker concept of equilibrium)
Excess supply is the norm - capitalism - prices set high - waste of produce = never at
equilibrium in the case of market clearing.
Profit rates equilibrium..?
Austrian:
-Dynamic historical view
-entrepreneurship and creativity
No equilibrium or weak equilibrium
Constant change
No efficiency properties
Temporary market power - creative destruction > create new products and innovation >
constant turnover of those holding market power - economy constantly changing
- Not as fast as seemed to suggest. ‘
- Lacks institutional detail.
- Individualistic view not realistic - usually takes a team/ department/ corporation
Continuous competition >>> may result in an oligopoly
Monopoly capital view
- classical literature
- stress on the product market.
- increasing returns - bigger firms win competition in long run
Tends to stop at oligopoly - cannot push too far - too big to eliminate others
(converge to oligopoly - non price competition - would destroy profits)
- Advertising, marketing, branding, cost reduction and technical change
Discounting products for a small amount of time - show which products are discounted
through advertising. (short term price reduction but not competing on price)
- Slow process - constant
- Technical change > most likely to disturb oligopoly
- Recessions
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