Journal of Economic Literature
ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)
Perfect Competition and the Creativity of the Market
Journal of Economic Literature
vol. 39,
no. 2, June 2001
(pp. 479–535)
Abstract
From the perspective of the Walrasian general equilibrium model, entrepreneurial and opportunistic behavior seems foreign. Can the model be refashioned so that it can accommodate such behavior? Many would say no, but we argue the contrary. Indeed, we present a reformulation of the model that serves as a gateway to, rather than a detour from, such contemporary issues as innovation and incentives. The trick is to reexamine what perfect competition means. Starting with an historical summary of general equilibrium, we sketch an image of the perfect competitor as an active market opportunist, seeking out profit potentials wherever he can.Citation
Makowski, Louis, and Joseph M. Ostroy. 2001. "Perfect Competition and the Creativity of the Market." Journal of Economic Literature, 39 (2): 479–535. DOI: 10.1257/jel.39.2.479JEL Classification
- D41 Market Structure and Pricing: Perfect Competition
- O31 Innovation and Invention: Processes and Incentives
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- D82 Asymmetric and Private Information
- D51 Exchange and Production Economies