Research Article Open Access

Price-Value Potential for Near-Perfectly Competitive Markets

Sergey K. Aityan1
  • 1 Lincoln University, United States

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.

American Journal of Economics and Business Administration
Volume 3 No. 4, 2011, 623-635

DOI: https://doi.org/10.3844/ajebasp.2011.623.635

Submitted On: 11 November 2011 Published On: 21 February 2012

How to Cite: Aityan, S. K. (2011). Price-Value Potential for Near-Perfectly Competitive Markets. American Journal of Economics and Business Administration, 3(4), 623-635. https://doi.org/10.3844/ajebasp.2011.623.635

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Keywords

  • Market equilibrium
  • differentiation
  • perfect competition
  • value
  • price-value
  • market modeling
  • market free energy