Competition

Jan Boone

No 2636, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Competition has been modelled in economic literature in a number of ways. What do these different parameterizations of competition have in common? For instance, it turns out that it is not always the case that a rise in competition reduces price cost margins, industry wide profits or concentration. All parameterizations of competition, considered here, have two features in common. First, the reallocation effect: a rise in competition raises the profits of a firm relative to the profits of a less efficient firm. Second, a rise in competition reduces the profits of the least efficient firm active in the industry.

Keywords: Competition; Measures of competition; Concentration; Price cost margin; Profits (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2000-12
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Citations: View citations in EconPapers (45)

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Working Paper: Competition (2000)
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