Customer-geared competition a socio-Austrian explanation of Tertius Gaudens

Abstract: Ever since the inception of market economy, competition is the propellant of such economic systems. This is most notably so at present with global economies on the verge of a so called ‘new’ market logic. Competition nevertheless remains an elusive phenomenon, something holding true in particular when it is said to coexist with cooperation.Common knowledge has it that competition can be grasped by focusing the sheer number of suppliers and/or the level of product differentiation in a market.This dissertation instead claims that by looking at competition as subject to the impact of customers, phenomena are seen which are not otherwise readily apparent in the scrutiny of markets.By approaching markets as networks of interconnected relationships which result from human interaction this theoretical thesis, inspired by economic sociology and Austrian economics, furthers the idea of competition as indirect and hence geared by the customer. An explanatory model is formulated where competition emerges as a function of ‘inducing customer alertness’ (the customer’s exercise of entrepreneurship in the supply market) on the one hand, and ‘impeding social capital’ (the social ties that prevail between the customer and suppliers) on the other.One crucial insight gained, with particular impact for competition policy, is that consumers are to be seen not only as beneficiaries, but also as agents, of competition.