Undesirable Competition

Leonard Wang () and Arijit Mukherjee

Discussion Papers from University of Nottingham, School of Economics

Abstract: It is generally believed that higher competition benefits consumers, and encourage the antitrust authorities to foster competition. We show that this view can be misleading in the presence of welfare-maximising nationalised firms. Using a simple model with a nationalised firm, we show that entry of private profitmaximising firms makes consumers worse off compared to nationalised monopoly. Entry increases profit of the incumbent firm, industry profit and social welfare at the expense of the consumers. Our result is important for competition policy.

Keywords: Competition; Consumer surplus; Nationalised firm (search for similar items in EconPapers)
Date: 2010
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Journal Article: Undesirable competition (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notecp:10/13

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