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c[circlecopyrt]The Review of Austrian Economics, 18:2, 195218, 2005.
2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.ANDERS LILJENBERG [email protected]
Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, SwedenAbstract. Austrian market process theory stands out in assigning particular importance to the role of the customer.
This is however not really salient as competition is discussed save for in a few particular instances. This is a pity since
the market process discourse thereby deprives itself of a firm progressive footing concerning further elaborations
of how market dynamics evolve. By drawing on the reasoning that originates some hundred years ago with the
works of Georg Simmel, this paper brings forward an Austrian version of his idea on Tertius Gaudens.Ina market
context this is the alert buyer who benefits from the disunion that prevails between sellers to the extent that market
intimacy, conceived of as supplier specificity, is low. In this manner some of the inner workings of the market
process, what promotes competition subject to which institutional constraints, are discussed to the benefit of yet
another important Austrian demarcation, that of competition as being geared by the customer.Key Words: competition, supplier specificity, entrepreneurship, Tertius GaudensJEL classification: A12, B53, M13, Z131. IntroductionDespite the undisputable fact that the way in which a market works is subject not only
to supply considerations but also to customer conduct, this line of reasoning is strikingly
absent in economics shouldering of competition. This holds also outside the immediate
mainstream realm as sellers are recognized not only as takers but also as makers of price
(confer Kirzner 1973). The omission of the customer as constituting a particular market
agency dates back all the way to early 18th century as Bernard Mandeville (1970 [1705]) lays
the solid formation for what later on will emerge as the scholarly treatment of competition
in political economy and neoclassical economics. It remains when Cournot formalizes
the argument some hundred years later and stays on as microeconomics becomes yet more
sophisticated until present days. This discourse is typically elaborated as more and more finetuned facets of price theory are presented. According to this predominant view, competition
appears as a mostly structural input, typically expressed as the sheer number of sellers
and/or the homo-/heterogeneous character of goods,...