Research Seminar MicroeconomicsHumans in the perfectly competitive market - Report from a fictional field studyKarine Nyborg (University of Oslo)
24 January 2019
The Microeconomics Research Seminar welcomes Karine Nyborg (Univercity of Oslo), who will present her work on
"Humans in the perfectly competitive market - Report from a fictional field study".
Place: Room 250, Allende-Platz 1
Hour: 17:15 - 18:45
We are looking forward to seeing you there!
Abstract
The perfectly competitive market – a hypothetical situation free of market failure – is a central benchmark for economic theory, providing the basis for the two welfare theorems. The radical abstractions of this idea makes it hard to grasp its full implications, however. In this essay, I explore the perfectly competitive market using literary fiction. Part I discusses fiction as a tool for economic theory. Part II is a science fiction story about a couple travelling to the perfectly competitive market for their honeymoon. Part III highlights main theoretical insights emerging from the story. First, to preclude market failure, complete social isolation must prevail. Second, the requirements of ‘no asymmetric information’ and ‘no external effects’ are extremely hard to reconcile. In particular, if trade is permitted at all times, deliberate learning is allowed, and new information can matter for welfare, no perfectly competitive market can exist.