Optimal Competition: A Benchmark for Competition Policy

Jan Boone

No 3766, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper introduces optimal competition: the best form of competition in an industry that a competition authority can achieve (given the information constraint that it cannot observe firms? efficiency levels). We show that the optimal competition outcome in an industry becomes more competitive as more money is spent in the industry, as the competition authority puts less weight on producer surplus and more weight on employment. The relation between competition and entry costs is U-shaped. Finally conditions are derived under which Cournot competition is too competitive compared to the optimal competition outcome.

Keywords: Competition; Competition policy; Objectives of competition policy; Liberalization versus regulation (search for similar items in EconPapers)
JEL-codes: D40 L40 L50 (search for similar items in EconPapers)
Date: 2003-02
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Citations: View citations in EconPapers (4)

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