Nature of Competition: Why to Join Forces
Economy as collective noun of economic
activities (M∙U∙T-1
in dimensions) begins with the cost-benefit analysis at the marginal step (T-1)
associated with a unit of utility (M∙U). The kind and the degree of the
marginal unit are conceived to be “unitary.” In practice, however, such a unit is
not necessarily real. There exist many kinds of things naturally lumpy in quantity and heterogeneous in quality. We join forces
(JF) mostly for those reasons, further subject to a strict and stringent cost-benefit
analysis
The unit in the market. We
once again clarify the nature of marginal thinking particularly in the market.
Demand is for consumption of four members per household per accounting period.
Supply is from production over the same period at the firm with a single workshop. Otherwise, the principles
of diminishing marginal benefit from consumption and increasing marginal cost
of production do not apply.
The
unit of product traded in the market is assumed to be of the same kind and
degree. In economics, the unit is very small yet recognizable at least. For instance,
the apple “as revealed in the market” will most probably be in the natural
unit. The watermelon is a piece in quarter at the smallest. We exogenous to the
marketing class are never interested in a “differentiated” product, “nice” or
otherwise. Calculus is neither marking nor economics.
With
the above said, most of us, the nameless, don’t forget to remember those
providential (boundary) conditions as in the reality. In the first place, we while
in Here are always and everywhere human in whole of entirety.
Natural and social reasons for JF.
The product as traded in the market is supposed to be in the marginal unit;
such marginality is specific to the product both on the demand and supply
sides. Putting the technically-possible purchase in lump aside, production in
preparation on the supply side is almost always with lumpy factors, or “creative powers” to be precise
For
instance, the human power is often imagined to be hirable per unit product. On
the flipside, the physical power such as a main-frame computer is assumed not to
be rentable piece-wise and must be lumpy so as to contribute to creating multiple
units. In the reality, at any rate, most rental contracts are lumpy so as to
cover unknowable and unpredictable number of units of production. In short, labor,
capital and land as called in economics are in reality lumpy as opposed to the unit
of product.
Furthermore,
due to spatial limitations and interpersonal relations, we live spread here and
there in solo or in group. The physical distance among the parties concerned
causes non-pecuniary barriers to pairwise
exchanges such as wasted time, information asymmetry and moral hazard.
Economic reasons. There
are many kinds of pecuniary transaction costs. There are various types of
externalities, positive and negative, as well. In practice, in other words, there
are frictions to activities, while the property rights are never perfectly
endowed to the owners.
Human reasons.
There is asymmetry in human capabilities innate or acquired. The acquired is
partly due to historical investment in the human asset. Such asymmetry is the basic
source of comparative advantage.
As
we repeat a particular kind of activity, we can save time doing it later on and
on. This event is sometimes dubbed as the “experience curve effect.” There is
the early or old bird special, as it were.
We
do not only have blind spots in the visionary system but also in the thinking
and imagination process. Exchanging ideas we can make up for imaginary blind
spots. “Two heads are better than one,” after all. This effect is sometimes
called “knowledge synergy.”
We
get “Out of sight, out of mind.” We when too far from one another lose the
communication efficiency and interpersonal chemistry among others.
People
respond to incentives, or so does Gregory Mankiw propose. We when too far from
sight are often allured by moral hazards and indolence. We tend to be a “leisure
class,” so to speak.
For
better or for worse, we are human!
Joining forces.
First, lumpiness of creative powers result in voluminous production of the
product by each more than demanded by all. In the name of efficiency we divide labor on one hand and business on the other hand. When we
divide “jobs,” we take the current comparative advantage into account. Icing on
the cake, specialization strengthens the comparative advantage still further. There
is the large bird special: once larger forever larger.
According
to a certain group of economists, working together in company at the firm help
save enormous costs of transaction as in the market between third parties. That’s
the nature of the firm is.
In
Modern Times, JF, including the partnership and joint venture , is
the way it is.
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