Following A. Smith and K. Marx, the mechanisms of market competition were considered by representatives of the neoclassical school. Unlike their predecessors, they argued that the value of goods is created not in the process of production, but in the market, where individual estimates of the value of goods by individual sellers and individual buyers are reconciled. Austrian, English, French, American, Italian scientists – representatives of this direction-
Considered value (price) as the result of competition between buyers, sellers, buyers and sellers. As long as the marginal utility of a good is higher than its marginal cost, competition stimulates an increase in production. As soon as the marginal cost exceeds the social utility of the good, factors come into play that cause production to decline. In conditions close to perfectly competitive, competition determines those volumes of production and prices that equalize costs and utility.
Alfred Marshall, a representative of the neoclassical school, was the first to formulate the laws of supply and demand and showed that many economic problems can be illustrated using supply and demand curves. For the first time, a graphic image of the establishment of a competitive equilibrium in the industry was introduced (he investigated the mechanism of automatic establishment of equilibrium in the market through perfect competition).
W. Jevons was one of the first who began to use the concept of “perfect competition”. This concept reflects the ideal model of the market, is a purely theoretical construction that does not reflect the real markets. At the same time, some of the main features of this model (many sellers and buyers in the industry, the absence of barriers to entry into the industry, the homogeneity of the industry product, the impossibility of collusion and the influence of individual entities on the market, etc.) were observed in the real economy in the second half of the XIX century, and in some industries are observed at the present time. The concept of “perfect competition” is close to the concepts of “atomistic competition”, “free competition”, which were used earlier. But in this model, more attention is paid to microeconomic aspects (the focus is on a separate industry, an individual producer, and not the economy as a whole), the main features are more clearly formulated.
L. Walras, V. Pareto and other scientists engaged in the analysis of the general economic equilibrium of the entire market system came to the conclusion that if the economy is close to the conditions of perfect competition, then it most optimally distributes resources between industries and goods between consumers. The authors of general equilibrium theories have shown that any decision and price depend on other individual decisions and prices and, in turn, influence them. It is impossible to establish equilibrium in a single market, it is established in all markets at the same time. The development of general equilibrium theories is an example of a systematic approach to economics, a reflection of the complex interdependencies between individual markets. According to these theories, the value of any commodity is always relative, it is impossible to look for its absolute and only correct value. The value of a good at any given moment is determined by the equilibrium of the utility of that good relative to all other goods and the relative marginal costs of that good (taking into account the opportunity cost of resources).
Thus, it can be concluded that in the theories of equilibrium analysis, the main attention was paid to the following functions of competition:
efficient allocation of resources by industry; ensuring production efficiency (maximizing the output and minimizing costs), i.e. efficient use of resources in production; ensuring the highest possible welfare of society.