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Anticompetitive traps and voting

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  • González-Maestre, Miguel
  • Peñarrubia, Diego

Abstract

In a two-sector economy, we consider the endogenous determination of the level of competition in the imperfectly competitive sector, under democratic, non-manipulated voting. In the context of the Salop’s (1979) circular model, we identify conditions such that in addition to a competitive equilibrium (with most voters choosing the efficient level of competition intensity), an inefficient equilibrium is observed in which a majority of fully rational and informed citizens vote for an inefficiently low level of competition intensity. In particular, we show that under reasonable conditions, a coalition of middle-class entrepreneurs, who vote for a lower level of competition intensity, defeats a “coalition of extremes” formed by high- and low-productivity entrepreneurs and pure consumers, who vote for a higher level of competition intensity. In addition, we show that the higher the degree of similarity among entrepreneurs, the more inefficient the anticompetitive equilibrium.

Suggested Citation

  • González-Maestre, Miguel & Peñarrubia, Diego, 2020. "Anticompetitive traps and voting," Mathematical Social Sciences, Elsevier, vol. 104(C), pages 47-59.
    • Handle: RePEc:eee:matsoc:v:104:y:2020:i:c:p:47-59
    DOI: 10.1016/j.mathsocsci.2020.01.007
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    References listed on IDEAS

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