Uniform Profit Ratios

Abstract

The equalization of profit rates as the outcome of free competition is one of the oldest tenets in theoretical economics. Being intuitively convincing its premises and implications, though, are not well defined. As Walras put it: ‘To state a theory is one thing; to prove it is another.’ First of all a consistent concept of profit is required. In the present paper the structural axiom set is taken as premise. Thereof the determinants of profit and the profit ratio follow. This makes it possible to definitively state the conditions for uniform profit ratios in a hierarchical market structure.

Keywords: new framework of concepts, structure-centric, axiom set, financial profit, relative prices, price level, harmonic structure, hierachical market structure, competition, monopoly, behavioral stability

JEL Classification: D40, D46, B41