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Competition

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  • Boone, Jan

Abstract

Competition has been modelled in economic literature in a number of ways. What do these different parameterizations of competition have in common? For instance, it turns out that it is not always the case that a rise in competition reduces price cost margins, industry wide profits or concentration. All parameterizations of competition, considered here, have two features in common. First, the reallocation effect: a rise in competition raises the profits of a firm relative to the profits of a less efficient firm. Second, a rise in competition reduces the profits of the least efficient firm active in the industry.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2636.

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Date of creation: Dec 2000
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Handle: RePEc:cpr:ceprdp:2636

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Keywords: Competition; Concentration; Measures Of Competition; Price Cost Margin; Profits;

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