Perfect Competition and the Creativity of the Market

Joseph Ostroy and Louis Makowski

Journal of Economic Literature, 2001, vol. 39, issue 2, 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.

JEL-codes: D41 D51 D82 D83 O31 (search for similar items in EconPapers)
Date: 2001
Note: DOI: 10.1257/jel.39.2.479
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Citations: View citations in EconPapers (57)

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