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

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Type of publication:	Book / Working Paper
Language:	English
Notes:	Dinda, Soumyananda and Mukherjee, Arijit (2010): A note on the adverse effect of competition on consumers. Published in: Journal of Public Economic Theory , Vol. 16, No. 1 (February 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:	BASE

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