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Chapter 5: Resource-Advantage Theory: Foundational Premises
All theories are derived from their foundational postulates. Table 5.1 displays the foundational premises underlying the standard treatment of perfect competition found in microeconomics texts (e.g., Gould & Lazear 1989) and compares them with those that are posited for resource-advantage theory. Foundational, as used here, implies not that the premises are the minimum set of axioms required for deriving theorems but that these premises are centrally important for understanding the two theories. Epistemologically, each premise in R-A theory—contrasted with perfect competition—is considered a candidate for empirical testing. Those found false should be replaced with ones more descriptively accurate.
|TABLE 5.1 Foundational Premises of Perfect Competition and Resource-Advantage Theory|
|Perfect Competition||Resource-Advantage Theory Theory|
|P1. Demand is:||Heterogeneous across industries, homogeneous within industries, and ...|