Munich Personal RePEc Archive

A note on the adverse effect of competition on consumers

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.

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Abstract

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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