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Content: Pure competition
The Firm Under Pure Competition
The Process of Competition
Competition as a dynamic process denotes rivalry between firms
Each seller tries to outperform its competitors. Firms use a variety of methods to compete--price, advertising, convenience, quality. Competing implies a lack of collusion on behalf of sellers. Competition is a force for social good. "it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest." Adam Smith. Benevolence as a social force is highly overrated. It does not generate information about valuation of goods and services which is necessary if we are to use our scarce resources efficiently. Pure Competition Model
Assumptions of the model
All firms in the market are producing a homogeneous product. A large number of independent sellers produce the product.