G. B. Richardson
- Published in print:
- 1997
- Published Online:
- November 2003
- ISBN:
- 9780198292432
- eISBN:
- 9780191596810
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198292430.001.0001
- Subject:
- Economics and Finance, Microeconomics
Firms base their investment decisions on expectations, these being based, in turn, upon information about relevant future circumstance. The availability of this information depends partly upon the ...
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Firms base their investment decisions on expectations, these being based, in turn, upon information about relevant future circumstance. The availability of this information depends partly upon the market structure within which firms operate. In perfect competition, firms would find this information impossible to obtain, which is the reason why no plausible account has been provided of how, given that particular market structure, movement to equilibrium could take place. In order to understand how market economies work, how competitive and complementary investments are coordinated, we need to take explicit account of circumstances, which commonly feature as ‘imperfections’, but make informed expectations possible.The information available to firms will always be incomplete and the expectations based on it necessarily uncertain. Consideration is therefore given to the strategies adopted in order to cope with this uncertainty.The selective or evolutionary function of competition is discussed, particular attention being given to its compatibility with the circumstances, which, by providing a firm's environment with stability, facilitate foresight.There is a discussion of whether firms’ response to uncertainty is likely to result in undue (or insufficient) discrimination against risky ventures and to a consequent misallocation of resources.Two articles published since the first edition of this book feature as Annexes to this edition. The Organisation of Industry explains the networks of inter‐firm cooperation and affiliation in terms of the need to coordinate activities that are complementary in a process of production but require different capabilities for their undertaking. Planning versus Competition deals with the ways in which economic activities can be coordinated, contrasting centralized and de‐centralized systems.Less
Firms base their investment decisions on expectations, these being based, in turn, upon information about relevant future circumstance. The availability of this information depends partly upon the market structure within which firms operate. In perfect competition, firms would find this information impossible to obtain, which is the reason why no plausible account has been provided of how, given that particular market structure, movement to equilibrium could take place. In order to understand how market economies work, how competitive and complementary investments are coordinated, we need to take explicit account of circumstances, which commonly feature as ‘imperfections’, but make informed expectations possible.
The information available to firms will always be incomplete and the expectations based on it necessarily uncertain. Consideration is therefore given to the strategies adopted in order to cope with this uncertainty.
The selective or evolutionary function of competition is discussed, particular attention being given to its compatibility with the circumstances, which, by providing a firm's environment with stability, facilitate foresight.
There is a discussion of whether firms’ response to uncertainty is likely to result in undue (or insufficient) discrimination against risky ventures and to a consequent misallocation of resources.
Two articles published since the first edition of this book feature as Annexes to this edition. The Organisation of Industry explains the networks of inter‐firm cooperation and affiliation in terms of the need to coordinate activities that are complementary in a process of production but require different capabilities for their undertaking. Planning versus Competition deals with the ways in which economic activities can be coordinated, contrasting centralized and de‐centralized systems.
