Competition through Technical Progress
AbstractThe 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. --
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Bibliographic InfoPaper provided by International Telecommunications Society (ITS) in its series 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation with number 18.
Date of creation: 2010
Date of revision:
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Web page: http://www.itseurope.org/
Investment; Competition; Technical Progress; Dynamic Competition;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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