A note on the adverse effect of competition on consumers

It is usually believed that higher competition, implying more active firms, benefits consumers. We show that this may not be the case in an industry with asymmetric cost firms. A rise in the number of more cost inefficient firms makes the consumers worse-off in the presence of a welfare maximizing tax/subsidy policy. A rise in the number of more cost inefficient firms also reduces social welfare.

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Year of publication:	2010-10
Authors:	Dinda, Soumyananda ; Mukherjee, Arijit
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	Competition \| Consumer welfare \| Cost asymmetry \| Tax

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Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Notes:	Published in Journal of Public Economic Theory 1.16(2014): pp. 157-163
Classification:	D43 - Oligopoly and Other Forms of Market Imperfection ; H25 - Business Taxes and Subsidies ; L11 - Production, Pricing, and Market Structure Size; Size Distribution of Firms ; L13 - Oligopoly and Other Imperfect Markets ; L40 - Antitrust Policy. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011271692