Price-Value Potential for Near-Perfectly Competitive Markets

Sergey K. Aityan

American Journal of Economics and Business Administration, 2012, vol. 3, issue 4, 623-635

Abstract: This study introduces price-value potential to be used instead of price for market analysis by analogy with free energy or thermodynamic potential in physics. A conservation principle is proposed for price-value potential. It is shown that price-value potential provides a constructive way for market analysis by identifying variation of equilibrium prices and quantities for different products in market equilibrium. A perturbation theory for a group of products with small differentiations on near-perfectly competitive markets was developed for illustration of the approach. The concept of price-value potential is illustrated in a simple example of a near-perfectly competitive market. It is shown that the equilibrium prices and quantities for products differ due to product differentiation that makes such an approach a constructive enhancement to the classical model of perfect competition.

Keywords: Market equilibrium; differentiation; perfect competition; value; price-value; market modeling; market free energy (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:abk:jajeba:ajebasp.2011.623.635

DOI: 10.3844/ajebasp.2011.623.635

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