We thank an associate editor, two anonymous referees, and Tarun Kabiraj for helpful comments and suggestions. The usual disclaimer applies.
A Note on the Adverse Effect of Competition on Consumers
Article first published online: 25 JUN 2013
© 2013 Wiley Periodicals, Inc.
Journal of Public Economic Theory
Volume 16, Issue 1, pages 157–163, February 2014
How to Cite
DINDA, S. and MUKHERJEE, A. (2014), A Note on the Adverse Effect of Competition on Consumers. Journal of Public Economic Theory, 16: 157–163. doi: 10.1111/jpet.12044
- Issue published online: 7 JAN 2014
- Article first published online: 25 JUN 2013
- Accepted manuscript online: 3 MAY 2013 07:30AM EST
- Manuscript Accepted: 5 OCT 2011
- Manuscript Received: 14 DEC 2010
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.