Competition through Technical Progress

François Jeanjean

No 18, 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation from International Telecommunications Society (ITS)

Abstract: The relationship between technical progress and price competition is a controversial issue in economics. This paper highlights the fact that investment in technical progress is an authentic type of competition which benefits the consumers rather than the industry. This type of competition exists when the potential for technical progress, which can be incorporated by firms through investment, is high enough. Competition is, in fact, made up of two components: A static one which is known as price or quantity competition and a dynamic one, the Technical Progress competition which also contribute to reduce prices and increase quantities for consumers. Consequently, the economic factors that increase a firm's margin do not have to be viewed as the consumers' enemy, but rather as an ally, under specific conditions, because they allow higher investments in new technology by which firms increase their capacities and attract higher demand from consumers. This paper also underlines that, for a mature market, the maximum Consumer Surplus as well as Social Welfare are attained by a constant level of combined competition which is only dependent on the size of the market and the number of firms. The level of combined competition can be defined as the product of the static and the dynamic level of competition. As a consequence, the higher the potential of technical progress is, the lower the level of static competition must be in order to reach the maximum level of Consumer Surplus and Social Welfare.

Keywords: Investment; Competition; Technical Progress; Dynamic Competition (search for similar items in EconPapers)
JEL-codes: D21 D43 D92 L13 L51 L96 O12 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/44334/1/18_jeanjean.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:itse10:18

Access Statistics for this paper

More papers in 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation from International Telecommunications Society (ITS)
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().