Competition and competitiveness are the terms frequently used both in business and public discussion about the economic units, their environment and about their ability to perform according to the strategic or policy goals derived from business, economic or social objectives. However, despite the fact that, … people who use the term „competitiveness“ do so without a second thought“, the meaning of the terms remain vague and to make things even more complicated, the exact meaning depends on the problem under hand.
The conceptual clarity is particularly important when one keeps in mind the purposes of teaching. Students first encounter the term in their first microeconomics class when beginning their studies. After some time they arrive to strategy class where the meaning and process of competition may seem very different from the former one. Almost infinite variety of real world situations and array of possible problems have created a continuum of views inspiring Boone (2000) to answer the question what is competition that „more than two hundred years after Adam Smith we still don’t know“ and Krugman (1996) to claim that at least in the case of nations (international trade) the term competitiveness is meaningless on the one hand and still giving possibility to have detailed definition for general public in Mirriam-Webster and a precise definition of competitive markets in economics on the other hand. In this theoretical paper that attempts to clarify the concepts of and around the competition the Stigler’s (1988) definition „competition is a rivalry between individuals , and it arises whenever two or more parties strive for something that all cannot obtain“ is used as a starting point. While Stigler clearly speaks in his broad definition about the real world, the economics definition of (perfect) competition is focused on the model world – the most important and defining features of the „competition“seem to be the objectives of the competition, the objectives of the analysis and the dimensions of the competition. The first set of confusion in the use of the term may arise from the differences of approaches taken by the different interested parties. Demsetz’s (1981) text where he analyses economic, legal, and political dimensions of competition may today be considered almost classical in that sense. The problem becomes even more complicated because of the fact that in addition, different languages (terminology) are used frequently. The second important complication arises from the aims of analysis. The business analyst developing new strategy for a firm may have very different look on the market compared with the analyst from the public sector who is trying to enhance the situation with the aim of (frequently vaguely defined) public benefit. The very different tools maybe used and results obtained even in the case of exactly the same object of analysis. The ideological content makes sometimes things even more problematic (Minford, 2006) in public discussion. The third set of complications arises from the existence of number of related and partly overlapping phenomena and terms: competition, competitiveness, productivity, effectiveness, comparative advantage and so on. Vickers (1995) gives a good introduction to the variety of competitions. 1. Objectives of competition Three important points to keep in mind when thinking about the objectives of competition are: underlying variable of competition (price, quantity, quality etc.); aimed level of achievement; and competitive process that is at least partly determined by the strategic objectives of agents. The importance of variables for analysis have deep roots in economic literature beginning with Cournot (1838) and Bertrand (1883). As described in Fudenberg and Tirole (1996) the topic has important place in game theory. The variety of results that have been achieved in models based on dual variables of price and quantity shows the possibility of almost infinite number of outcomes of competitive process with varying objective variables in real world.. Two extreme situations of competitiveness are described with the lines on the denoting minimum sustainable and maximum achievable levels of outcome. The first is not clearly determined (it is always possible to do better), yet in most cases when people speak or write about competition they keep in mind striving towards this extreme point achievable only in neoclassical economics. In reality of bounded rationality the competitors are only on their way towards it and the aim determines only the direction, not the endpoint. 2. Levels of competition In his book with famous notion about invisible hand Smith (1977) speaks also about how the different levels in society are influenced by competition. Recently, the literature on the matter has expanded very fast. Most prominent recent writer on the topic is Porter (1990, 2008) who has distinguished different levels of competition as meaningful. Firms, locations, clusters, and countries compete or at least seek to be and become competitive each on its characteristic environment of competition. A region is more a geographical than economic unit but it still has important role to play in the competition literature. As with the country level, regional competitiveness is a controversial concept but number of phenomena in economies can be explained with the help of it. 3. The field of competition Main source of the confusion with the term competition seem to be its complexity (Fig. 3) and problems with the determining the focal unit of competition. For the purposes of this paper the focal unit of competition (the competitor) may be any group of persons that is distinguishable by at least one of following criteria: the persons may be bound into the group (firm etc.) legally; they may have common budget constraint; they may have common preferences and/or objectives; or they may have common decision making and/or empowerment mechanism. The field of competition defines the unified framework for the analysis of competition and competitiveness in terms of six dimensions: defining criterions of focal units of competition, the objectives of competition, internal and external determinants of competitiveness, configuration of relationships influencing the competitive process, combination of static and dynamic elements in the field of competition, and the purpose of modeling. The model creates a framework to clarify the aggregation needed when moving from the firm-level analysis to the country-level analysis. [SCIENCE TODAY] K Rajaram IRS 291025 On Wed, 29 Oct 2025 at 17:05, Jambunathan Iyer <[email protected]> wrote: > Competition is a by-product of productive work, not its goal. > A creative man is motivated by the desire to achieve, not by the desire to > beat others > > > *N Jambunathan , Chennai " What you get by achieving your goals is not as > important as what you become by achieving your goals. If you want to live a > happy life, tie it to a goal, not to people or things "* > > > -- You received this message because you are subscribed to the Google Groups "Thatha_Patty" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To view this discussion visit https://groups.google.com/d/msgid/thatha_patty/CAL5XZoo8C3%2B9aK%3D5hmKWCBVH8G-DjJsuu-4vEcvjU0i3mCUJvw%40mail.gmail.com.
