Dynamics of competition (the). a restoration of the classical analysis

Abstract

This article seks to buil~ a formal model of the d1namics of competition on the foundations laid by the classical economists : Smith, Ricardo, and Marx.The ana1ysis of such a model reveals that with certain assumptions market pri ces wi 11 converge to pri ces of production and the economy wi 11 stabilize on a path of homothetical growth.The adjustment process of market prices involves bath 1 price and quantity omponent, where inventories play an important role.The most striking result is that convergence is reached in three stages where the economy displays the features of equilibrium in some regards and disequilibrium in others.First, for each commodity a unique price is reached; second, the rates of profit in each industry are equalized (even where multiple techniques exist), and last,the most profitable technique eventually prevails.The model is robust enough ta allow for the investigation of numerous "cases".For instance, we analyse the results where 11 rationed 11 markets exist.