theory of markets

theory of markets

the body of theory concerned with how scarce FACTORS OF PRODUCTION are allocated between the multitude of product MARKETS in the economy More specifically the theory of markets is concerned with the determination of the prices and outputs of goods and services and the prices and usage of factors of production.

The ‘theory of markets’ distinguishes between types of markets by reference to differences in their MARKET STRUCTURE. The main structural distinction is made according to the degree of SELLER CONCENTRATION, that is, the number of suppliers and their relative size distribution. Other structural features emphasized include the character of the product supplied, that is, whether it is a HOMOGENEOUS PRODUCT or differentiated (see PRODUCT DIFFERENTIATION), and the CONDITION OF ENTRY to the market. Given these structural distinctions, the theory examines the way in which market structure interacts with MARKET CONDUCT to produce particular patterns of MARKET PERFORMANCE. See also PERFECT COMPETITION, MONOPOLISTIC COMPETITION, OLIGOPOLY, MONOPOLY, RESOURCE ALLOCATION, MARKET STRUCTURE-CONDUCT-PERFORMANCE SCHEMA, FACTOR MARKETS, PRICE SYSTEM, PARETO OPTIMALITY.

References in periodicals archive ?
Yet real mechanics operate within the market, and an economist can use the theory of markets to say useful and intelligible things about observed patterns of mechanical activity within a society.
Stringham lays out the tension in the late Friedrich Hayek's work between Hayek's theory of markets and his theory of law and legislation.
But Stiglitz's papers, published in the 1970s and early 1980s, shifted the mainstream paradigm of the microeconomic theory of markets.
For example, there was no good theory of markets dominated by a few firms; macroeconomic phenomena could not be fully explained by microeconomics; and economic development needed its own type of theory.
He takes a common-sense approach to both theory and practice, describing the theory of markets, market processes, data and information analysis, labor markets, and social, ethical and political considerations (including the Chicago School approach).
To her credit, she looks at the theory of markets and health care and at specific practices and outcomes as markets affect health care, especially in the United States.
A 'consumer votes' theory of markets now substitutes for political democracy.
The so-called Keynesian revolution which transformed macroeconomic theory in the 1930s was largely untouched by these advances in the theory of markets, continuing to rely on the time-honored assumption of atomistic competition.
In this important new book, Fligstein suggests that what is lacking is a coherent theory of markets as social institutions.
Throughout the book, Mintrom builds from concepts embedded in economic theory of markets to suggest that similar forces are at work in politics.
The Dow Theory of Markets, which beat out the other methods from 1900 to 1937, after 1937 never did perform very well at all.
Finally, Elinor Ostrom's chapter on relationships between concepts from administrative theory and the theory of markets and other polycentric systems reminds readers that the kind of empirical work demonstrated in the volume cannot be undertaken without firm conceptual foundations.

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