The competitive firm and perfect competition

2020 ◽  
pp. 263-298
Author(s):  
David M. Kreps
Keyword(s):  
General Equilibrium ◽  
Equilibrium Analysis ◽  
Perfect Competition ◽  
Partial Equilibrium ◽  
Competitive Firm ◽  
Partial Equilibrium Analysis ◽  
Production Plans ◽  
Market Equilibria ◽  
As If

This chapter addresses market equilibria for competitive firms, firms that act as price takers. It develops a theory which is based on the hypothesis that firms and consumers act as if they have no effect on prices; consumers choose what to consume and firms choose their production plans in the belief that the prices they see are unaffected by their decisions. There are two ways to proceed in the theory. One could continue analysis of general equilibrium in the style of Chapter 6, but with firms added to the story. Or one can undertake partial equilibrium analysis. The chapter begins with the classic partial equilibrium analysis of perfect competition. It then develops an example that shows how a partial equilibrium perspective can be misleading, before discussing general equilibrium with firms.

Distributive Justice and the Rules of the Corporation: Partial Versus General Equilibrium Analysis

2005 ◽  
Vol 15 (3) ◽  
pp. 355-362 ◽  
Author(s):  
John H. Beck
Keyword(s):  
Economic Analysis ◽  
Distributive Justice ◽  
General Equilibrium ◽  
Equilibrium Analysis ◽  
Partial Equilibrium ◽  
Small State ◽  
General Equilibrium Analysis ◽  
Long Run ◽  
Large Sector ◽  
Partial Equilibrium Analysis

Abstract:Progressives have advocated reforms of rules governing corporations to achieve greater distributive justice, but Maitland (2001) has argued that corporate rules are distributively neutral and that changing the rules will have no long run impact on distributive justice. These different conclusions stem from the use of two different methods of economic analysis, partial equilibrium and general equilibrium models. A change in the rules governing corporations in a “large” sector of the economy is appropriately analyzed using a general equilibrium analysis, supporting the conclusion that changes in the rules may affect distributive justice in the long run. However, a partial equilibrium analysis of a change in the rules of corporations affecting a “small” part of the economy such as a single firm or even all firms in a small state supports the claim that such changes cannot affect distributive justice.

Macro/Micro Modelling and Gini Multi-Decomposition: An Application to the Philippines

2010 ◽  
Author(s):  
Stéphane Mussard ◽  
Luc Savard
Keyword(s):  
General Equilibrium ◽  
The Philippines ◽  
Equilibrium Analysis ◽  
Partial Equilibrium ◽  
Economic Modelling ◽  
Policy Reforms ◽  
Policy Makers ◽  
Partial Equilibrium Analysis ◽  
General Equilibrium Effect ◽  
Equilibrium Effect

Macro/micro-economic modelling has emerged as a rigorous instrument to link policy reforms with changes in income distribution. Indeed, this approach enables one to capture directly the general equilibrium effect of policy reforms upon changes in household welfare. These endogenous distributions combined with the Gini multi-decomposition provide powerful and detailed information for policy-makers interested in the trade-off between inequality and the efficient impact of reforms. Our results show that including the general equilibrium effect can yield results that differ from those of partial equilibrium analysis.

Keynes and the Marshall-Walras Divide

1999 ◽  
Vol 21 (2) ◽  
pp. 117-136 ◽  
Author(s):  
Michel De Vroey
Keyword(s):  
General Equilibrium ◽  
Equilibrium Analysis ◽  
Partial Equilibrium ◽  
General Equilibrium Analysis ◽  
Preliminary Step ◽  
Second Stage ◽  
Keynesian Theory ◽  
Research Programs ◽  
Partial Equilibrium Analysis ◽  
The Relationship

This paper is a sequel to De Vroey (1998d) and (1998e). In these papers, I pondered upon the relationship between the Marshallian and the Walrasian research programs and defended the view that a divide should be drawn between them, contrary to the opinion of the majority of economists who see no need for such. I argued that these research programs differ on two scores. First, they are based on different conceptions of equilibrium. Second, they differ on the way in which they broach the issue of the working of the decentralized economy. The hallmark of the Marshallian approach is that it proceeds in two steps. The working of particular markets is analyzed in a first stage whereas the issue of their coordination is assigned to the second stage of the inquiry. Contrarily, the hallmark of the Walrasian approach is to immediately start the analysis at the level of the economy as a whole. Put differently, in the Marshallian approach, partial equilibrium analysis is seen as a first preliminary step to general equilibrium analysis, whereas in the Walrasian approach one immediately proceeds with the latter. The aim of the present paper is to show the incidence of this twofold difference on the interpretation of Keynesian theory.

Comments on "Shadow Pricing and Macroeconomic Analysis: Some Illustrations from Pakistan" by Squire et al.

1979 ◽  
Vol 18 (2) ◽  
pp. 113-115
Author(s):  
T. N. Srinivasan
Keyword(s):  
General Equilibrium ◽  
Equilibrium Model ◽  
General Equilibrium Model ◽  
Equilibrium Analysis ◽  
Partial Equilibrium ◽  
Shadow Prices ◽  
Essential Point ◽  
Economic Issues ◽  
Shadow Pricing ◽  
Extreme Sensitivity

The paper is too long for conveying the message that shadow pricing used as a method of analysis in micro-economic issues of project selection is also useful for analysing macro-economic issues, such as foreign and domestic borrowing by the government, emigration, etc. Much of the methodological discussion in the paper is available in a readily accessible form in several publications of each of the coauthors; In contrast, the specific application of the methodology to Pakistani problems is much too cavalier. While it is hard to disagree with the authors' claim that shadow pricing "constitutes a relatively informal attempt to capture general equilibrium effects" (p. 89, emphasis added), their depiction of traditional analysis is a bit of a caricature: essentially it sets up a strawman to knock down. After all in the traditional partial equilibrium analysis, the caveat is always entered that the results are possibly sensitive to violation of the ceteris paribus assumptions of the analysis, though often the analysts will claim that extreme sensitivity is unlikely. Analogously, the shadow pricing method presumes "stationarity" of shadow prices in the sense that they are “independent of policy changes under review" (p. 90). The essential point to be noted is that the validity of this assertion or of the "not too extreme sensitivity" assertion of partial equilibrium analysts can be tested only with a full scale general equilibrium model! At any rate this reviewer would not pose the issue as one of traditional partial equilibrium macro-analysis versus shadow pricing as an approximate general equilibrium analysis, but would prefer a description of project analysis as an approach in which a macro-general equilibrium model of a manageable size (implicit or explicit) is used to derive a set of key shadow prices which are then used in a detailed micro-analysis of projects.

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