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Questions tagged [competition]

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In perfect competition, why is there economic loss if marginal cost > marginal revenue?

Here's a graph for reference: In the left graph, I read from a book (CFA L1 notes) that At any output above the quantity where $MR = MC$, the firm will be generating losses on its marginal ...
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2answers
73 views

How can perfectly competitive firms earn zero profits?

Consider a firm that chooses the quantity of labour $L$ to hire which maximises its profits. As usual, we suppose that output $Y$ is increasing in $L$ but at a strictly decreasing rate; and for ...
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3answers
91 views

Do price controls increase competition?

Question: Is there any way to show that price controls might increase competition? I'm trying to find a way, any way, that price controls might lead to an increase in competition between companies. I'...
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0answers
45 views

Will the market for driverless cars move toward a monopoly?

There is a short article in The Economist (link below) where the writer makes the claim that because there are firms the exhibit economies of scale - in driverless technology - they will eventually ...
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1answer
76 views

Algebraic demand curve in a perfectly competitive market for a firm

I've had a few years of economics courses already but still there are some basic things in the field that I just can not wrap my head around... (let's say economics is not my favorite field of study) ...
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1answer
64 views

Mathemtical Economics Question regarding Profit Maximization

I'm studying Mathematical Economics and there's this question that I'm unable to understand. Q. Suppose a firm faces a demand curve for its product $P = 32 - 2Q$, and the firm's costs of production ...
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0answers
40 views

Competition and welfare - empirical evidence

Consider the following claims: less competitive markets deliver worse outcomes for consumers, less competitive markets deliver lower social welfare, less competitive markets deliver higher prices/...
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0answers
17 views

Do ads work for businesses as they used to and how can they be measured if it's possible?

The gist of Seth Godin's 'Purple Cow' is that advertisements don't work any more. As marketers, we know the old stuff isn't working. And we know why: because as consumers, we're too busy to pay ...
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1answer
208 views

Why bankrupt firms continue to operate?

Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down? Well, obviously there's a reason behind ...
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0answers
7 views

Why would it be anti-competitive for promoters of gigs to allocate tickets to the secondary market?

Competition Authorities are investigating promoters and primary sellers who allocate tickets directly to the resale market. But why is this anti-competitive?
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1answer
48 views

When big companies invest on a new idea/product?

I am graduated in AI field. I love robotics and intelligent systems, so I worked on some new products by myself at home that have new ideas and are interesting(at least me and my friends think!). I ...
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0answers
32 views

In perfect compition, how does the marginal revenue = marginal costs equality relates to the intersection of supply and demand curve?

In a perfect competitive market, the price and quantity are determined where supply and demand curve intersect (supply = upwards sloping because of increasing costs of production in short periods of ...
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2answers
47 views

Why exactly does a perfectly competitive market depend on consumers having perfect information about a product?

My book states that one factor defining a perfectly competitive market is its participants having full information about prices and product characteristics. I can understand how having perfect ...
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1answer
298 views

Why would a natural monopoly lose money when MC=P, but a competitive firm would get positive accounting profit?

I assume that the natural monopoly is required by law to have maximum price=MC. According to this video such regulation would require constant subsidies for monopoly, because otherwise it would go ...
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1answer
10 views

What does pilot price mean in the context of marketing?

In my lecture slide, it is said to be one of the competition-based price determination. When I searched online, I was unable to find anything relevant.
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1answer
57 views

Which is the origin of the “economic” approach to production?

Economic theory states that under competitive markets, economic profits are zero (even though accounting profits are not zero). What is the origin of this analysis? Who was the first author to write ...
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1answer
26 views

Interpreting wedge between MP and wage

I am an econ master student and I need a bit of help understanding an issue, for my thesis. I have two related questions. Assume a firm producing a good with labor and capital, $Y=F(L,\bar K)$. ...
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2answers
440 views

In microeconomics : is this the contradiction in the atomicity of firms ?

Let $p$ be the market demand. It is a function of the market production $Q$. Let $q_i$ be the production of firm $i$. Reading Steve Keen (in Debunking Economics, chapter II) quoting George Stigler, I ...
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1answer
383 views

Hayek's defense of competition regulation

This article claims Hayek endorsed competition regulation: As it evolved, neoliberalism became more strident. Hayek’s view that governments should regulate competition to prevent monopolies from ...
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3answers
205 views

Why does competition work for capitalism?

As far as I know, capitalism is based on competition: If two(or more) companies produce similar products that compete against other, these companies are in a competition. Because the objective of a ...
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1answer
192 views

Monopoly and competitive output levels

Why do markets that are dominated by a single seller have a tendency to maximize profits at lower levels of output than their competitive counterpart? Why is the competitive market equilibrium price ...
2
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1answer
103 views

Non-constant returns to scale and competitive factor markets

I am having difficulties to understand the conclusion in bold below, taken from Frankel (1962): A second limitation of the Cobb-Douglas function appears when it is fitted to historical ...
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5answers
4k views

What is the difference between a free market and a perfectly competitive market?

I am trying to find the distinction between a free market and a perfectly competitive market, and I can't find the right definition on what makes them different. Can someone give me a clearly ...
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2answers
103 views

Adam Smith and wage gap?

Recently I was reading up on Adam Smith's economic philosophy of competition (i.e self interest) and division of labor. While I understand (and agree) with Smith's commentary that free markets and ...
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1answer
743 views

How do we find a competitive equilibrium price when 2 firms operate with different marginal costs?

Consider a homogenous goods market with the demand function Q = 30 − P, where Q and P denote quantity and price respectively. There are two firms playing a price game in the following manner: firm 1 ...
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0answers
139 views

Why are inventions inevitably correlated with imperfect competition?

Romer (1990) elaborates the incompatibility of nonrival inputs with constant returns to scale: If a production function depends on rival and nonrival inputs and both inputs are productive, then the ...
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1answer
42 views

Government Ownership vs Private Ownership

In a debate concerning long term economic strategy, a representative of a left party was trying to support that privatisation and Small Government which minimizes its own activities is not a viable ...
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2answers
632 views

Are market structures on a spectrum?

So I understand that each market structure has their own characteristics, and that for instance Perfect Competition involves high competition, and I believe Monopolistic competition slightly less so, ...
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0answers
14 views

Method actually used to calculate injury in antitrust/cartel case by EC (EU)

I've read about a number of techniques used to estimate injury in competitive cases (but-for, regression analysis, difference-in-differences) but I fail to see how they are applied in the context of ...
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2answers
308 views

Cournot Model Monopoly example

Good day In my Microeconomics course, we are handling the 4 imperfect competition models. Currently we are discussing the Cournot Model, however I am unsure about a certain example. This is given as ...
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1answer
89 views

What exactly is a trust?

In my history class, we're studying the Industrial Revolution and how Rockefeller came to dominate the oil industry with his Standard Oil company. According to our textbook, a man named Samuel Dodd (...
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2answers
2k views

Is the marginal cost the same for every firm in a perfectly competitive market?

Spin-off from: market equilibrium quantity $\ne$ firm profit maximising quantity? Consider a perfectly competitive market with equilibrium price $P_{eq}$ and quantity $Q_{eq}$ and firm with profit ...
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1answer
172 views

market equilibrium quantity $\ne$ firm profit maximising quantity?

Consider a perfectly competitive market with equilibrium price $P_{eq}$ and quantity $Q_{eq}$ and firm with profit maximising quantity $Q_f$ as illustrated below: I guess any firm in the market would ...
4
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1answer
920 views

Why does demand curve shift in, in a monopolistic competitive market?

In a monopolistic competitive market, demand curves shift in, if more firms enter the market. I can't seem to wrap my head around it. Demand remains the same, supply has increased. Shouldn't entry of ...
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0answers
16 views

It seems firms spend a lot of time and energy “capturing” market share. Why is that?

Are consumers just silly and once they like a firm they go for it regardless of the price? Or is there something more complex going on?
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0answers
70 views

Empirical Evidence of Cournot Competition?

Is there empirical evidence to validate the use of Cournot competition between multiple suppliers and a buyer? Are there models which extend Cournot competition to different levels in a larger supply ...
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0answers
22 views

Market share stability by state owned enterprises

Is market share stability or market division by 3 state owned enterprises anti competitive and can it come under the purview of US Anti trust acts?
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0answers
65 views

Economies of scale in Robinson Crusoe economy?

I encountered the following question: Which of the following will NOT exist in a one-man economy? 1. competition 2. private property rights 3. economies of scale Turns out the answer was 1 and 2. I ...
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0answers
21 views

Are there times when firms compete more with each other?

I have the impression that sometimes firms are fiercely competing with each other, innovating and trying to gain market share and other times when firms are just hanging on. Are there any references ...
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1answer
212 views

Why do firms adjust their fixed costs in response to a change in price in a perfectly competitive market?

When firms make a profit in a perfectly competitive market, new firms enter the market and drive the price down. My textbook says that the existing firms will then adjust inputs that are fixed in the ...
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4answers
270 views

Why is Uber worth almost as much as Boeing?

At $68 billion, Uber has a higher valuation than GM, Ford, and Honda. According to Microaxis, Boeing is currently valued at around $87 billion. Why is Uber worth so much? I would think that ...
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0answers
36 views

In which market form does the firm try to maximize the quantity demanded?

Suppose there is a market form with the following assumptions: 1) The good sold in exactly identical. 2) The number of firms is very large and each firm is small compared to the Industry. 3) There ...
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5answers
831 views

Why don't Burgers cost 5 cents?

In this blog post, economist Bob Murphy raises a puzzle involving the principle that in a competitive market, the price equals the marginal cost: There’s a general principle from intro to ...
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0answers
70 views

In which all market forms or types of competitions is the Price Elasticity of Demand quite high?

I know that for Monopolistic Competition, the PED is quite high as there is a variety of substitutes. The same logic applies for Perfect Competition, but what about Oligopoly? And also, in the case of ...
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1answer
2k views

What is the difference between Herfindahl Index and the Concentration Ratio

I was recently reading about the Herfindahl Index and from what I've learned so far, is that HHI is preferred over the Concentration Ratio. However, I didn't quite understand the reasoning that lead ...
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0answers
41 views

A high store loyalty indicates what kind of competition among cement retailers selling products of the same brand?

To provide some context, this question occurred to me while I was considering the cement retail market. If one considers retailers selling cement of only one brand, then the concept of brand loyalty ...
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0answers
27 views

Existence of a competition

Is there any theorem or a set of criteria that can prove whether in a given market there will be any sort of competition?
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0answers
36 views

Did Sprint just dump 11M customers of Clearwire?

Clearwire used to offer unlimited 2Mbps down / 256kbps up broadband at the time, over licensed 2,5GHz spectrum, for a low price of under 32 USD/month residential, or 49,99 USD/month business. http://...
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3answers
220 views

Why wouldn't competition prevent “usurious” payday loan rates?

The current Wiki page on "Payday Loans" claims loans are priced above marginal cost. The justification is that If a lender chooses to innovate and reduce cost to borrowers in order to secure a ...
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1answer
109 views

Monopolistic and Bertrand (Nash) Competition

Can we view the monopolistic competition equilibrium (a la Dixit-Stigliz) as the limit case of a Bertrand competition with an infinite number of firms providing differentiated products, where the ...