Questions tagged [competition]
The competition tag has no usage guidance.
76
questions
22
votes
3answers
3k views
Why is collective bargaining by a group of employees not the same thing as price-fixing?
Employees sell their labor for wages. If a critical mass of employees get together and demand higher wages, how is this not the same thing as a critical mass of merchants illegally fixing the price of ...
18
votes
4answers
949 views
Is net neutrality not important in a competitive market of internet providers?
In my understanding, allowing ISP to throttle sites that use a lot of traffic is just price discrimination. The ISP will charge sites like Netflix, which will then pass the cost to Netflix consumers. ...
9
votes
5answers
1k 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 ...
9
votes
3answers
425 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 ...
9
votes
1answer
87 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/...
7
votes
4answers
5k views
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 ...
7
votes
4answers
337 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 ...
7
votes
1answer
1k views
Benefits of a cartel among firms
Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and $\...
6
votes
1answer
88 views
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 ...
5
votes
2answers
817 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 ...
5
votes
1answer
69 views
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 ...
5
votes
6answers
12k 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 ...
5
votes
1answer
4k 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 ...
5
votes
1answer
155 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 ...
4
votes
2answers
599 views
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 ...
4
votes
1answer
1k 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 ...
4
votes
0answers
53 views
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 ...
4
votes
0answers
210 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 ...
3
votes
1answer
1k 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 ...
3
votes
1answer
47 views
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 ...
3
votes
2answers
93 views
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 ...
3
votes
1answer
1k 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 ...
3
votes
1answer
45 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, $Y=F(L,\bar K)$. ...
3
votes
2answers
209 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 ...
3
votes
2answers
2k 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, ...
3
votes
0answers
21 views
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 ...
2
votes
3answers
380 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 ...
2
votes
1answer
257 views
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 ...
2
votes
1answer
387 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 ...
2
votes
1answer
302 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 ...
2
votes
1answer
239 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 (...
2
votes
1answer
24 views
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 ...
2
votes
2answers
5k 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 ...
2
votes
1answer
71 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 ...
2
votes
0answers
39 views
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 ...
2
votes
0answers
98 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 ...
2
votes
0answers
91 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 ...
2
votes
0answers
22 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 ...
2
votes
0answers
74 views
Forming of consumption habits in dynamic equilibrium model?
I just have a question, if you know an example where the consumers form a habit about their consumption in a perfect competition setup. I found this paper by Fuhrer, but it does not solve the it in a ...
2
votes
0answers
70 views
Decreasing consumption prices and increasing housing prices
It's election time in my country. The government boasts a decrease of 5% in consumption prices thanks to removing regulations, while the opposition blames the government for an increase of 5% in ...
1
vote
3answers
235 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'...
1
vote
1answer
74 views
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 ...
1
vote
1answer
36 views
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 ...
1
vote
2answers
429 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 ...
1
vote
1answer
441 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 ...
1
vote
1answer
60 views
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 ...
1
vote
1answer
255 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)
...
1
vote
1answer
2k 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
...
1
vote
1answer
92 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 ...
1
vote
1answer
368 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 ...
