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“Ineffective†competition: a puzzle?

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  • Ivanov, Andrey V.
  • Mueller, Florian

Abstract

Conventionally, we think of an increase in competition as weakly decreasing prices, increasing the number of consumers served, thus increasing consumer surplus, decreasing firms profits, etc. Here, we demonstrate that, under some tame circumstances, an increase in competition may lead to a price increase in a horizontally differentiated market. We show this relationship for the petrol market in German cities.

Suggested Citation

  • Ivanov, Andrey V. & Mueller, Florian, 2006. "“Ineffective†competition: a puzzle?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 117, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:117
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    References listed on IDEAS

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    1. Norbert Schulz & Konrad Stahl, 1996. "Do Consumers Search for the Highest Price? Oligopoly Equilibrium and Monopoly Optimum in Differentiated Products Markets," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 542-562, Autumn.
    2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    3. repec:bla:econom:v:55:y:1988:i:220:p:479-91 is not listed on IDEAS
    4. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
    5. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
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