Does more market competition lead to higher income and utility in the long run?

Peter Stauvermann and Ronald Kumar

Bulletin of Economic Research, 2022, vol. 74, issue 3, 761-782

Abstract: In this paper, we investigate if more competition leads to higher per capita incomes and/or to a higher level of utility in the long run. To this end, we use a Diamond overlapping‐generations model but relaxing the assumption of perfect competition in the good market. We show that the weaker the competition the more unequal the distribution of income. Surprisingly, we note that in general, tougher competition does not lead either to an increase in per capita incomes or to an increase in nonfirm owners’ utility in the long run.

Date: 2022
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https://doi.org/10.1111/boer.12318

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