Undesirable competition

We show that the entry of private profit-maximising firms makes the consumers worse off compared to having a nationalised monopoly. Such entry increases the nationalised firm’s profit, industry profit, and social welfare, at the expense of the consumers. Our result is important for competition polic...

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Bibliographic Details
Published in:Economics letters 2012-02, Vol.114 (2), p.175-177
Main Authors: Wang, Leonard F.S., Mukherjee, Arijit
Format: Article
Language:English
Subjects:
Competition
Consumer surplus
Monopolies
Monopolistic competition
Nationalised firm
Profit maximization
Profits
Social welfare
Studies
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Summary:We show that the entry of private profit-maximising firms makes the consumers worse off compared to having a nationalised monopoly. Such entry increases the nationalised firm’s profit, industry profit, and social welfare, at the expense of the consumers. Our result is important for competition policy. ► We show the implications of entry on consumers in the presence of a nationalised firm. ► The entry of profit-maximising firms makes the consumers worse off compared to having a nationalised monopoly. ► Such entry increases social welfare at the expense of the consumers.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2011.09.021