Neoclassical economics has two theories of competition between
profit-maximizing firms (Marshallian and Cournot-Nash) that start from
different premises about the degree of strategic interaction between firms, yet
reach the same result, that market price falls as the number of firms in an
industry increases. The Marshallian argument is strictly false. We integrate
the different premises, and establish that the optimal level of strategic
interaction between competing firms is zero. Simulations support our analysis
and reveal intriguing emergent behaviors.Comment: Accepted for Physica
