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Discussion Paper Details

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Title: Competition

Author(s): Jan Boone

Publication Date: December 2000

Keyword(s): Competition, Concentration, Measures Of Competition, Price Cost Margin and Profits

Programme Area(s): Industrial Organization

Abstract: Competition has been modelled in economic literature in a number of ways. What do these different parameterizations of competition have in common? For instance, it turns out that it is not always the case that a rise in competition reduces price cost margins, industry wide profits or concentration. All parameterizations of competition, considered here, have two features in common. First, the reallocation effect: a rise in competition raises the profits of a firm relative to the profits of a less efficient firm. Second, a rise in competition reduces the profits of the least efficient firm active in the industry.

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Bibliographic Reference

Boone, J. 2000. 'Competition'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2636