Full Competition and Innovation

Juan Ignacio Palacio-Morena, Alejandro Mungaray-Lagarda, Lizbeth Salgado-Beltrán and Jaciel Ramsés Méndez-León ()
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Juan Ignacio Palacio-Morena: Faculty of Economics and Business Administration Albacete, University of Castilla-La Mancha, 02071 Castilla-La Mancha, Spain
Alejandro Mungaray-Lagarda: Department of Economics, University of Sonora, Hermosillo 83000, Mexico
Lizbeth Salgado-Beltrán: Department of Economics, University of Sonora, Hermosillo 83000, Mexico
Jaciel Ramsés Méndez-León: Department of Economics, University of Sonora, Hermosillo 83000, Mexico

Sustainability, 2025, vol. 17, issue 2, 1-22

Abstract: Economic science is built on the basis of the concept of competition. Classical School economists have not defined this concept with precision. The “Neoclassic Revolution” defined the concept of perfect competition as an ideal combination of productive resources accessible to all permanently (optimal size). Within this framework, competition ensures that suppliers will cover demand by matching market prices to both average and marginal costs corresponding to the optimal size. Large and persistent differences in profit and wage rates, when interpreted from a perfect competition perspective, will always be considered a sign of the absence of competition. Only an alternative concept of competition can modify such an interpretation. In this context, the objective of this work was to develop an alternative concept of full competition, which is formally formulated, to foster a more sustainable environment for the coexistence of enterprises of different sizes. The full competition definition assumes that firms maximize long-term benefits (fixed-capital amortization period) by trying to ensure full use of productive capacity and achieving relative advantages through innovation instead of merely adjusting prices to maximize short-term benefits. This approach provides a different explanation for inequalities in profit and wage rates, from simple adjustment in prices (perfect competition) to the search for new and better opportunities through innovation (full competition). This could change the meaning and scope of economic policies, which are influenced by both Neoclassical and Keynesian approaches, when addressing the entrepreneurial challenges of sustainable development.

Keywords: full competition; perfect competition; market power; industrial policy; innovation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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