Perfect Competition

M Ali Khan
A version of the above text will appear in a new, forthcoming edition (2007) of The New Palgrave: A Dictionary of Economics.
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In his 1987 entry on Perfect Competition in The New Palgrave, the author reviewed the question of the perfectness of perfect competition, and gave four alternative formalisations rooted in the so-called Arrow-Debreu-Mckenzie model. That entry is now updated for the second edition to include work done on the subject during the last twenty years. A fresh assessment of this literature is offered, one that emphasises the independence assumption whereby individual agents are not related except through the price system. And it highlights a linguistic turn whereby Hayeks two fundamental papers on division of knowledge are seen to have devastating consequences for this research programme.