Competition, Knowledge, and Institutions
Journal of Economic Issues, No. 2, pp. 457-463, 2006
Posted: 17 Dec 2007
This article analyses the effects of institutions if an evolutionary concept of competition in the tradition of Friedrich Hayek and Joseph Schumpeter is used instead of a neoclassical concept of competition. In a first step, an evolutionary approach to competition as a process of parallel experimentation is presented: Hypotheses about better problem solutions are created, tested, and spread, leading to a process of knowledge accumulation. In the second part it is demonstrated that the institutional framework influences the dynamics and the direction of this evolutionary experimental search process. From a policy perspective, it can be asked how the rules of the game should be shaped for channeling this process of generation and spreading of new knowledge in market competition into the direction of a greater fulfillment of consumers' preferences.
JEL Classification: B52, B53, L10, O31
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