A note on the adverse effect of competition on consumers

Soumyananda Dinda () and Arijit Mukherjee

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Competition; Consumer welfare; Cost asymmetry; Tax (search for similar items in EconPapers)
JEL-codes: D43 H25 L11 L13 L40 (search for similar items in EconPapers)
Date: 2010-10, Revised 2011-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Public Economic Theory 1.16(2014): pp. 157-163

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Related works:
Journal Article: A Note on the Adverse Effect of Competition on Consumers (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:64063

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