EVOLUTION AND MARKET COMPETITION

Profit maximization is the usual prerequisite for achievement of a per fectly competitive equilibrium. However, for a long time it has been t hought that this principle of profit maximization can be replaced by n atural selection. In an evolutionary model of an industry, where firms ' outputs are chosen randomly, where entry occurs with no motivation, and where exit occurs when a firm's wealth becomes negative, this pape r shows that the industry converges in probability to a perfectly comp etitive equilibrium as each firm gets infinitesimally small relative t o the market, as the entry cost gets sufficiently small and as time ge ts sufficiently large. (C) 1995 Academic Press, Inc.