The Desirability of Price Instability Under Perfect Competition

THE TECHNIQUES of partial equilibrium analysis and comparative statics have proven to be invaluable in the classical theory of the firm. However, when risk and uncertainty are introduced into the model, we find that the classical theory is incapable of producing the succinct propositions so characte...

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Bibliographic Details
Published in:Econometrica 1961-01, Vol.29 (1), p.58-64
Main Author: Oi, Walter Y.
Format: Article
Language:English
Subjects:
Competition
Competitive firms
Distribution of profits
Equilibrium
Expected utility
Expected values
Hypotheses
Marginal cost curve
Marginal profit
Marginal utility
Present value of future profits
Prices
Probability distribution
Probability distributions
Profit centers
Profit motive
Profits
Utility functions
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Summary:THE TECHNIQUES of partial equilibrium analysis and comparative statics have proven to be invaluable in the classical theory of the firm. However, when risk and uncertainty are introduced into the model, we find that the classical theory is incapable of producing the succinct propositions so characteristic of the static analysis. This is not to say that it cannot be used in such problems. In fact we lean heavily upon this classical theory, amending it with the necessary tools to handle the specific problem posed in this paper.
ISSN:0012-9682
1468-0262
DOI:10.2307/1907687