Economics Dictionary of ArgumentsHome
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| Pure competition: Pure competition in economics is a market structure characterized by a large number of firms offering identical products with no barriers to entry or exit. In this idealized form, no single firm can influence prices, which are determined by supply and demand. Consumers have perfect information, and firms produce at an efficient scale, leading to optimal resource allocation. See also Monopolies, Monopoly price, Oligopolies, Competition._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Pure Competition - Dictionary of Arguments
Rothbard III 719 Pure Competition/Rothbard: The theory of monopoly price has been generally superseded in the literature by the theories of "monopolistic" or "imperfect" competition.(1) As against the older theory, the latter have the advantage of setting up identifiable criteria for their categories - such as a perfectly elastic demand curve for pure competition. >Competition/Rothbard, >Monopolist price/Economic theories, >Monopolies/Rothbard. RothbardVs: Unfortunately, these criteria turn out to be completely fallacious. Essentially, the chief characteristic of the imperfect-competition theories is that they uphold as their "ideal" the state of "pure competition" rather than "competition" or "free competition." Def Pure competition: Pure competition is defined as that state in which the demand curve for each firm in the economy is perfectly elastic, i.e., the demand curve as presented to the firm is completely horizontal. >Elasticity, >Demand/Rothbard. RothbardVsPure competition theory: The pure-competition theory, however, is an utterly fallacious one. It envisages an absurd state of affairs, never realizable in practice, and far from idyllic if it were. In the first place, there can be no such thing as a firm without influence on its price. Rothbard III 720 The monopolistic-competition theorist contrasts this ideal firm with those firms that have some influence on the determination of price and are therefore in some degree "monopolistic." Yet it is obvious that the demand curve to a firm cannot be perfectly elastic throughout. At some points, it must dip downward, since the increase in supply will tend to Iower market price. As a matter of fact, it is clear from our construction of the demand curve that there can be no stretch of the demand curve, however small, that is horizontal, although there can be small vertical stretches. >Monopoly price/Rothbard, >Monopolistic competition/Rothbard. Rothbard III 721 Elasticity: Of course, the demand curve for each small wheat farm is likely to be very highly, almost perfectly, elastic. And yet the fact that it is not "perfect" destroys the entire concept of pure competition. For how does this situation differ from, say, the Hershey Chocolate Company if the demand curve for the latter firm is also elastic? Once it is conceded that all demand curves to firms must be falling, the monopolistic-competition theorist can make no further analytic distinctions. Cf. >Oligopolies/Rothbard. 1. In particular, see Edward H. Chamberlin, Theory of Monopolistic Competition, and Mrs. Joan Robinson, Economics of Imperfect Competition. For a lucid discussion and comparison of the two works, see Robert Triffin, Monopolistic Competition and General Equilibrium Theory (Cambridge: Harvard University Press, 1940)._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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