SUSTAINABILITY OF THE TRADITIONAL CONCEPT OF PERFECT COMPETITION UNDER THE CONDITIONS OF DIGITAL TECHNOLOGY

Ante Čović, Ljerka Cerović and Dario Maradin
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Ante Čović: HEP - Distribution System Operator, Zagreb
Ljerka Cerović: Faculty of Economics and Business, University of Rijeka, Croatia.
Dario Maradin: Faculty of Economics and Business, University of Rijeka, Croatia.

UTMS Journal of Economics, 2024, vol. 15, issue 2, 135-147

Abstract: The Internet and modern technology have significantly reshaped the landscape of the modern marketplace and influenced various aspects of economic theory, including the concept of perfect competition. Perfect competition, the cornerstone of classical economics, presupposes a market structure in which numerous small firms operate, produce homogeneous products, have no barriers to entry or exit from the industry, and have perfect information. The advent of the Internet and modern technology directly tests this theoretical construct and points to the dual role of these phenomena. And while the questionable nature of the role of the Internet and modern technology in the sustainability of the traditional concept of perfect competition is primarily due to the homogeneity of the product and the price-taking process, Porter's forces imply support for the classical model of perfect competition, especially due to perfect information and the freedom to enter and exit the industry. Paradoxically, the latter facilitate innovation and product differentiation, which contradicts the basic assumptions of perfect competition.

Keywords: Internet; modern technology; consumer preferences; competition; insurance market (search for similar items in EconPapers)
JEL-codes: D41 L10 L86 (search for similar items in EconPapers)
Date: 2024
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