A perfectly competitive economy is an economy without welfare relevant endogenous learning

Karine Nyborg

No 2/2021, Memorandum from Oslo University, Department of Economics

Abstract: I demonstrate a straightforward but apparently widely unrecognized implication of the standard requirements for perfect competition: an economy in which consumers can choose to learn is generally not perfectly competitive. In particular, if endogenous welfare relevant learning is feasible, the economy cannot be perfectly competitive unless identical learning choices by all consumers are guaranteed. If the new information is not shared with everyone, asymmetric information arise; if information is shared, externalities arise. The standard conditions for the two fundamental welfare theorems, thus, implicitly preclude heterogeneous welfare relevant learning decisions.

Keywords: Perfect competition; fundamental welfare theorems; learning; symmetric information; externalities (search for similar items in EconPapers)
JEL-codes: D41 D50 D60 D61 D62 D82 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2021-05-03
New Economics Papers: this item is included in nep-cwa, nep-mic and nep-ore
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