Perfect Competition and the Creativity of the Market
Joseph M. Ostroy
Journal of Economic Literature
no. 2, June 2001
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.
Makowski, Louis, and Joseph M. Ostroy.
"Perfect Competition and the Creativity of the Market."
Journal of Economic Literature,
Market Structure and Pricing: Perfect Competition
Innovation and Invention: Processes and Incentives
Search; Learning; Information and Knowledge; Communication; Belief
Asymmetric and Private Information
Exchange and Production Economies