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Genre = Economics
Intriguing Connections = 1) Learning Economics: Basic to Advanced,
The aim of this book is to elucidate various alternative ways to think about competition. Some descriptions of competition is based on Schumpeter, others on other classical economists. All the authors disagree with the neoclassical version of competition, which is perfect competition. Much of the theories explained in the book have to do with how companies maintain their profit share when competitors have the ability the impact that profit.
Important implications of the explanations include how the competitors adapt to different resource constrains. They point out that if a company sees that it has rising average costs, the company will try to innovate and bend the cost curve downward to reduce the future average costs. The innovate firm, faces short term costs above the average as they try to figure out how to decrease the cost curve. Should they survive and find different resource allocation techniques, they will have lower cost curves than their competitors. Not all firms survive the innovating stage. Many of their theories try to explain how and why companies seek to increase their competitive advantage. Most authors use historic explanations and some use statistical analysis to provide credence to their theories.
The book is generally extremely easy to read. Most sections provide an understanding of various theories of competition, and then seek to explain their own analysis and understanding of it. As the article are written by different people, it would have helped to provide some common competition oriented vocabulary rather than reexplain everything from the start again. To be clear, it was very helpful to read similar competition theories as it created a deeper understanding of a particular repeated theory, but it would have been better to connect them from article to article rather than sporadically recreate explanations. There were few parts that were more difficult to read, such as the statics which could have been made been easier to digest. Sometimes they provided criticism to other theories without fully explaining what they were criticizing, which made it really difficult to follow.
Some of the problems with this book is that when they are discussing neoclassical perfect competition, they make it sound as if that is all neoclassical theories have to offer. It may be true that perfect competition does not describe the actual competition seen in the world and how companies react to competition, but it does not mean that all the implications are irrelevant with the association of perfect competition. More importantly, they seem to criticize neoclassical theories without looking at the comebacks to their criticisms. Beside the reason for attacking perfect competition, some of them claim that neoclassical theories are dominant in the world today, which is not really the case and a possible reason for their claim is to lay blame to a particular theory as they disagree with the policy implications generated in the world today.
Pages to read: 318
1st Edition: 2013
Ratings out of 5: