A Note on the Adverse Effect of Competition on Consumers

Soumyananda Dinda () and Arijit Mukherjee

Journal of Public Economic Theory, 2014, vol. 16, issue 1, 157-163

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.

Date: 2014
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Working Paper: A note on the adverse effect of competition on consumers (2011)
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