Questions tagged [competition]

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Is it allowed to have a company that is not profitable?

In my old memories my teacher said that we can't have a company who are not profitable. The reason is to prevent unfair competition. Ex : Toyota sell car at 10 \$ during 2 years. Every other mark ...
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Realistic examples of quantity competition

In microeconomic models of oligopolies we consider price competition and quantity competition (think Cournot, Bertrand, Stackelberg). I can easily imagine price competition where a producer sets the ...
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Sequential and simultaneous price competition

Frims 1 (leader) and 2 (follower) compete in price with product differentiation • Find the equilibrium price, quantity and profit when they choose price simultaneously and sequentially. q1=100-10p1+...
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Long run equilibrium price under perfect competition

I have a problem related to Ricardian rent. I have one firm, let's call it X firm, and all of the other firms in the market. All firms have to pay some transportation costs due to their land except ...
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Better Model for Dynamic pricing - Stackelberg model or Bertrand model

Objective - I am building a dynamic pricing tool for airline tickets which will consider the competitor prices. Taking competitor price as reference, this tool will price the ticket. Also instead of ...
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3 votes
2 answers
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How are real income and utility the same thing?

The textbook I'm using, "Microeconomic Theory: Basic Principles and Extensions", treats utility and real income as the same thing in the chapters on compensated and uncompensated demand. I ...
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1 answer
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How can a "producer face a limited market as regards sales and yet a highly competitive market as regards price"?

Kaldor (1972): it is evident that the co-existence of increasing returns and competition—emphasised by Young and also by Marx, but wholly excluded by the axiomatic framework of Walrasian economics—is ...
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3 votes
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Does the Labor Theory of Value hold in the long term in competitive markets?

Most criticisms of the Labor Theory of Value I have come across go something like this quote from Carl Menger: There is no necessary and direct connection between the value of a good and whether, or ...
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Airline competition and econometrics

If I wish to understand the competitive constraints of airline A on airline B, what sort of econometric relationship should I investigate ?. Immediately what comes to mind is to look at the impact of ...
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1 answer
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Does a competitive advantage lead to abnormal profit? [closed]

Given that organisational capital is specific and difficult to replicate it is considered a competitive advantage (see e.g. here) According to Wang (2014) competitive advantage is obtained when an ...
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Is there a qualitative difference between the rent derived from a supply fixed by nature and single supplier required to supply a fixed quantity?

The assumption are that supply is absolutely and permanently fixed at q average and marginal costs are zero demand always exceeds supply (P ≥ 0) The graph should look the same in both cases: a ...
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Are urban land (location) markets considered competitive even though the market price does not equal marginal cost (zero)?

Urban land (location) supply is fixed and the marginal cost of bringing an urban plot into production is zero. Even when land owners do not collude to limit the supply, the fixed supply arguably ...
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What has been the reception of Posner & Weyl’s claim that property rights lead to market power?

Posner & Weyl claim that property rights lead to monopoly rents: Property Is Only Another Name for Monopoly Radical Markets Have their claims been elaborated, tested, or peer-reviewed? In ...
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Measuring effects of degree of (buyer) competition on price: references

I would like to examine the effect of degree of competition (market power?) among buyers on price of a product. I have data on product price, number of buyers with nonzero purchases and a couple more ...
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2 answers
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How does a CLEC innovate?

A CLEC, competitive local exchange carrier, is described... A competitive local exchange carrier (CLEC), in the United States and Canada, is a telecommunications provider company (sometimes called a &...
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The Dumping Argument and Trusts

I have often heard the following argument against the antimonopoly/anticollusion law: Whenever the entrepreneurs decide to enter into "illegal" collaboration, each one has an opportunity to ...
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4 answers
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Why have so many legitimate smaller biotechs sprung up and thrived?

I stumbled this question on r/AskScienceDiscussion, but I'd like to ask it from a microeconomics or competition standpoint. Why can't Big Pharma accomplish what legitimate small biotechs have? ...
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2 votes
1 answer
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Does the theory of contestable markets apply to industries where there is a natural monopoly?

The theory contestable markets requires that there be no barriers to entry, no sunk costs, and access to the same level of technology. I know common industries that have natural monopolies (like ...
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Has it truly been established that the restaurant industry operates on thin margins?

For as long as I can remember I've constantly seen the truism that restaurants operate on "razor sharp margins" repeated endlessly by the media, the restaurant industry, and the average joe. This ...
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Why is the equilibrium network size can be less than the socially optimal size in networks w/ positive externalities for single system?

For Context, I am reading http://web.mit.edu/rpindyck/www/Courses/NetEx19.pdf. The chapter talks about network externalities in single system like fax machine, email, vaccinations for measles. ...
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Prices set by firms are the same in a Salop circle. But why?

Trying to calculate the prices charged by each firm, I don't understand why the solution argues that all firms set the same price. If I use the assumption that they are the same, I can figure out the ...
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Military and Business Strategy

I am thinking through the parallels between military and business strategy but am stuck on a foundational aspect. Most of business strategy results from some kind of competition in order to gain ...
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2 votes
4 answers
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Why do we spread knowledge across nations?

We have access to lots of knowledge on paper sharing platforms, open course platforms, open-source platforms and question asking platforms and etc, and Tesla opened all its electric car patents in ...
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3 votes
2 answers
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What are possible solutions when promoting competition is not applicable?

Usually, more competition means lower prices and higher quality as less effective businesses go out of business. However, it appears that it's not always the case. When there're a lot of health ...
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Pricing Strategy for Product that Ships Across a Country

Not sure if this is the right place for this question. Assume I produce a grocery item that I want to sell across the country. If I sell my product to a grocery nearby, my shipping cost will be less ...
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1 vote
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Is there evidence that non-profits might have a tax or other competitive advantage in competing with for-profit corporations?

Lets say my non-profit's interest is to diminish co2 emissions in the city. Are there useful forms of putting that tax money for better use and gaining competitive advantage against other for-profit ...
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Competitive vs complete and non-competitive vs incomplete marekts

The very insightful questions that arise, when someone studies micro foundation are the following: What is the difference between competitive and complete marekts? When we refer to the first is it ...
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7 votes
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Do companies have non compete agreements between each other?

Do companies also know for a better lack of words armistice? When searching for non compete agreements everything that comes up are agreements between companies and employees, but do whole companies ...
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Emergence of notion "primitive business" in the era of Industry 4.0 and globalization

It has always been the conventional wisdom that businesses should be fit to survive in the market competition, that only the best businesses can survive beyond horizon of several years, that survival ...
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3 votes
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Why do some perfectly competitive, loss-making firms shutdown and others don't?

Question: Why do perfectly competitive, loss-making firms that have (AC>AVC>AR) shutdown but Firms that have (AC>AR>AVC) not shutdown? -Both of these types of firms are making a loss. How is it ...
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Examples of Analysis of Competition in a Latent Product Characteristic Space

Competition between firms offering heterogenous products is often an exercise of constructing the right kind of spatial model. There is the famous Hotelling model and many other papers that model ...
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Intermediate Case of Bertrand and Cournot

I am wondering whether there is a model of oligopolies in which we have some intermediate case of Bertrand and Cournot competition. What I do not mean by "intermediate" is the mixed Bertrand - Cournot ...
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Cournot competition subgame perfect Nash equilibrium with two products

QUESTION: Assume there are two types of products, labelled $l$ and $n$. Firms compete in the market by choosing which product to sell and then choosing the quantities. Let $Q_n$ and $Q_l$ denote the ...
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cournot competition with strategic consumers

I am not familiar with economics but does anybody know any reference about cournot competition with strategic consumers? In other words, is there any known competition where both producer and ...
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Can State Owned Enterprises compete with each other without a private enterprise in a market? Examples

In a domestic market, there exist multiple (around 5) multi-product state-owned enterprises. In a few products, SOEs compete with private enterprises while in the majority of products, the SOEs share ...
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3 votes
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Are modern conglomerate mergers better or worse for economic competition?

Modern conglomerate mergers differ from those from decades ago as, even though they takeover smaller companies, they have a more narrow focus on related business and, in order to be successful, have ...
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4 votes
2 answers
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What would you call a real market that is close to perfect competition?

I want to explain perfect competition to students using a few practical examples without going into much of the theory. But I want it to be theoretically accurate and I don't want to claim that those ...
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1 vote
1 answer
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Is this market monopoly or duopoly?

Could you help me to identify monopoly, because I got confused. There is a company with market share of 54 %. The second one has market share of 21 %. Can this market be characterized as monopoly or ...
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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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2 votes
1 answer
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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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1 vote
3 answers
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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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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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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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2 votes
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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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8 votes
1 answer
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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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1 answer
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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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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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2 answers
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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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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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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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