Competition, Diversity and Economic Performance

Competition, Diversity and Economic Performance

Processes, Complexities and Ecological Similarities

Clement A. Tisdell

This thought-provoking book explores the influences of market competition and diverse behaviours of economic agents on economic performance, particularly dynamic economic performance.

Chapter 9: Market impediments, restrained reactions and market dynamics

Clement A. Tisdell

Subjects: economics and finance, evolutionary economics, industrial economics, environment, ecological economics


The theme is developed in this chapter that restrained market reactions and impediments to marketing, such as market transaction costs, can play a positive role in stabilizing markets and increasing the speed of convergence of markets towards their equilibrium. Therefore, these factors are able in certain circumstances to improve the performance of markets. The view that restrained market reactions are capable of improving economic performance is not entirely new. Richardson (1990) has argued that this is possible. Furthermore, Tobin (1978) has suggested that a tax on market transactions (a market impediment) can, in some circumstances, improve economic performance. Many factors can result in market reactions being restrained. For example, restraints on market reactions by suppliers may arise due to their mixed behaviours and expectations. Furthermore, different sellers may experience different levels of market transaction costs which can also restrain their use of markets. Non- profit maximizing behaviour by all suppliers or a sufficient proportion of them can help to stabilize markets. The latter hypothesis will be considered first, then the dynamic implications of restrained market reactions by sellers will be examined. Subsequently, the role of market transaction costs in improving the dynamics of markets is discussed and some consequences for market equilibrium of the amount of knowledge possessed by sellers are explored.

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