ABSTRACT
The crown jewel of neoclassical microeconomics, perfect competition, allows no space to deal with the actual behavior of real-world competition, no room for the concept of competition-as-war. In the conceptual structure of neoclassical microeconomics, the notion of firms acquiring competitive weapons, deploying technologies intended to lower costs in order to undersell rivals, makes no sense. Competitive firms have no need to employ such competitive weapons because they are too small to gain any advantage from so doing. Perfectly competitive firms are passive “price takers”: they can sell all they can profitably produce for their size and their behavior cannot alter the industry's structure of market shares. Seeking to gain market share from rivals would bring no benefits, only losses, signaling the presence of combative oligopolies hell-bent on planting the seeds of their own destruction. As far as concerns neoclassical microeconomics in both extremes of market structures, perfectly competitive industries and pure monopoly, firms seek to maximize their profits. Focusing on producing output up to the level where marginal cost equals market price, perfectly competitive firms achieve efficient allocation of resources. While seeking to maximize profits, in perfectly competitive industries free entry brings in new firms that end up competing away all “pure” profits: profit rates fall to parity with the interest rate. Why business would carry on production activities when rewards are no higher than interest yields on no risk bank deposits is not considered. Monopolists obtain profits by lowering output relative to competitive levels, taking advantage of barriers to entry into the industry. But in all cases, neoclassical theory ignores business strategies to deploy innovations, preferably process innovations, as competitive weapons to gain market share at the expense of rivals (Tsoulfidis, 2010, 2011).
