<p>I would say yes. For example, consider a perfect competition scenario, with equilibrium price <span class="math-container">$p$</span>.</p>
<p>Now say (only) one firm acquires some organizational capital that allows them to have lower their marginal cost from <span class="math-container">$c(=p)$</span> to <span class="math-container">$\tilde c &lt; c$</span>.</p>
<p>This firm can charge price <span class="math-container">$p^-$</span> and aquire the whole market now, earning abnormal profits <span class="math-container">$\pi = (p^- - \tilde c)q$</span>.</p>

CC BY-SA 4.0
2020-12-25T10:41:36.540Z
It CAN lead to abnormal profits. Or not. Like, alternatively, this firm can have (near) zero profit and survive in shrinking market, where other firms are either leaving or declaring bankruptcy due to getting negative profits due to shrinking demand.
KarmaPeasant
CC BY-SA 4.0
2020-11-25T02:49:13.433Z
2020-11-25T02:49:13.433Z
Dayne
<p>Given that organisational capital is specific and difficult to replicate it is considered a competitive advantage (see e.g. <a href="https://www.researchgate.net/publication/228900943_Organizational_capital_as_competitive_advantage_of_the_firm" rel="nofollow noreferrer">here</a>)</p>
<p>According to <a href="https://www.researchgate.net/publication/285056180_Theories_for_competitive_advantage" rel="nofollow noreferrer">Wang</a> (2014)</p>
<blockquote>
<p>competitive advantage is obtained when an organisation develops or acquires a set of
attributes (or executes actions) that allow it to outperform its
competitors.</p>
</blockquote>
<p>Does a competitive advantage allow a firm to achieve <a href="https://en.wikipedia.org/wiki/Abnormal_profit" rel="nofollow noreferrer">abnormal profit</a>?<br />
Or which other advantage would it confer?</p>

CC BY-SA 4.0
2021-04-24T04:32:29.690Z
What exactly do you mean by "abnormal" here?
Giskard
CC BY-SA 4.0
2021-04-29T11:24:10.407Z
“Abnormal” in the sense of a profit that cannot be maintained in a competitive market. Organisational capital is difficult to replicate. This suggests that the competitive advantage can be maintained in a competitive market.
sba222
CC BY-SA 4.0
2020-11-24T19:26:28.430Z
wouldn't that be normal profit?
Criticize SE actions means ban
<industrial-organisation><competition><theory-of-the-firm>
Does a competitive advantage lead to abnormal profit?
sba222
# Does a competitive advantage lead to abnormal profit?

(Asked by: username_0 on 2020-11-24)

Given that organisational capital is specific and difficult to replicate it is considered a competitive advantage (see e.g. [here](https://www.researchgate.net/publication/228900943_Organizational_capital_as_competitive_advantage_of_the_firm))

According to [Wang](https://www.researchgate.net/publication/285056180_Theories_for_competitive_advantage) (2014)

> competitive advantage is obtained when an organisation develops or acquires a set of
> attributes (or executes actions) that allow it to outperform its
> competitors.

Does a competitive advantage allow a firm to achieve [abnormal profit](https://en.wikipedia.org/wiki/Abnormal_profit)?  
Or which other advantage would it confer?

**Tags:** industrial-organisation, competition, theory-of-the-firm
> **Comments:**
> **username_2**: wouldn't that be normal profit?  
> **username_1**: What exactly do you mean by "abnormal" here?  
> **username_0**: “Abnormal” in the sense of a profit that cannot be maintained in a competitive market. Organisational capital is difficult to replicate. This suggests that the competitive advantage can be maintained in a competitive market.  

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## 1 answers

### Answer by username_3 on 2020-11-25. Score: 0

I would say yes. For example, consider a perfect competition scenario, with equilibrium price $p$.

Now say (only) one firm acquires some organizational capital that allows them to have lower their marginal cost from $c(=p)$ to $\tilde c < c$.

This firm can charge price $p^-$ and aquire the whole market now, earning abnormal profits $\pi = (p^- - \tilde c)q$.

> **Comments:**
> **username_4**: It CAN lead to abnormal profits. Or not. Like, alternatively, this firm can have (near) zero profit and survive in shrinking market, where other firms are either leaving or declaring bankruptcy due to getting negative profits due to shrinking demand.  

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