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Microeconomic Theory pp 195–234Cite as

The Elements of Fixprice Microeconomics

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Part of the Recent Economic Thought Series book series (RETH,volume 6)

Abstract

Two main ideas will be developed here. First, that fixprice analysis is not a negation of the competitive equilibrium model, but rather a more general framework which includes perfect competition as a special case. It is a study of markets in a wider sense. It concerns “prices” more than “fixity”: it abstracts from specific features of market behavior and analyzes general properties of allocation mechanisms where market prices play a fundamental role. Second, that fixprice analysis has two main interpretations (logically distinct but related in a subtle way, see Arrow [1959]): the monopolistic competition interpretation, which views economic agents as having differing degrees of monopoly (or monopsony) power (competitive equilibrium being the special case where monopoly is nil) and the competition in the short run interpretation, which views the economy as perfectly competitive but assumes that it takes time for prices and quantities to adjust to their competitive equilibrium levels (competitive equilibrium being the only relevant situation in the special case where adjustment is very fast).

Keywords

  • Labor Market
  • Demand Curve
  • Excess Demand
  • Competitive Equilibrium
  • Output Market

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

“I shall argue that the postulates of the classical theory are applicable to a special case only, and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium.”

J. M. Keynes, General Theory … , Chapter 1.

“Allegiance to rigor dictates the axiomatic form of analysis where the theory, in the strict sense, is logically entirely disconnected from its interpretations.”

G. Debreu, Theory of Value, preface.

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Authors
  1. Joaquim Silvestre
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Editors and Affiliations

  1. Department of Economics, The Pennsylvania State University, 16802, University Park, PA, USA

    Larry Samuelson

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Silvestre, J. (1986). The Elements of Fixprice Microeconomics. In: Samuelson, L. (eds) Microeconomic Theory. Recent Economic Thought Series, vol 6. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-4219-6_9

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  • DOI: https://doi.org/10.1007/978-94-009-4219-6_9

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