Postrel on Competitive Advantage
| Peter Klein |
Former guest blogger Steve Postrel gave an interesting presentation at last week’s AoM Professional Development Workshop on competitive advantage: “Competitive Advantage: Can’t Live With It, Can’t Live Without It.” Steve sent me the slides and was happy to share them here. Add your questions and comments below.
Steve provides a set of conditions that must be met for competitive advantage to be internally consistent and operationally meaningful, then presents his own (unique) definition, a simple and precise formulation in terms of gains from trade:
Seller 1 has competitive advantage over Seller 2 with respect to a specific transaction if and only if the economic surplus (gains from trade = V – C) from a transaction between 1 and the buyer is greater than the surplus from a transaction between 2 and the buyer. The difference in surplus is the CA.
A series of implications, qualifications, and applications follows. What do you think?