American Journal of Economics and Business Administration

Price-Value Potential for Near-Perfectly Competitive Markets

Sergey K. Aityan

DOI : 10.3844/ajebasp.2011.623.635

American Journal of Economics and Business Administration

Volume 3, 2011

Pages 623-635

Abstract

This study introduces price-value potential to be used instead of price for market analysis by analogy with free energy or thermodynamic potential in physics. A conservation principle is proposed for price-value potential. It is shown that price-value potential provides a constructive way for market analysis by identifying variation of equilibrium prices and quantities for different products in market equilibrium. A perturbation theory for a group of products with small differentiations on near-perfectly competitive markets was developed for illustration of the approach. The concept of price-value potential is illustrated in a simple example of a near-perfectly competitive market. It is shown that the equilibrium prices and quantities for products differ due to product differentiation that makes such an approach a constructive enhancement to the classical model of perfect competition.

Copyright

© 2011 Sergey K. Aityan. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.