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The Concept of Competition

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The Concept of Competition

In most societies, competition is considered as the way by which something achieves its ends and serves as the method through which it attains those ends. But in business, competition is viewed as an important tool used to facilitate change and innovation. Competition is a competition by which two or more bodies compete for a common end which can not be entirely shared: in place of the end shared, one’s gain is that of the other. In competitions, competitors try to outsmart each other in a particular activity or act in order to achieve their common goals.

However, competition itself can lead to a series of undesirable outcomes, such as the leveling of wages, deterioration in quality of product or service, and so on. Therefore, unless there is a method to reduce or eliminate competition, society will continue to face a series of problems arising from the Nash equilibrium. The solution to these problems is usually found in the form of norms or rules formulated in a competitive context, with a view to regulate the Nash equilibrium.

One of the most common methods of ensuring competitiveness is the presence of asymmetric competition. Asymmetric competition is competition that arises due to the existence of a marginal demand in the economy. The presence of asymmetric competition is seen in all kinds of activities conducted by organizations. These activities include price determination, output determination, investment decision-making, marketing decision-making, innovation, and allocation of resources. Since there are no price signals, there is no true competition and the result is an inefficient allocation of resources. However, this kind of competition is considered acceptable and does not affect the Nash equilibrium.

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