Optimal Competition: A Benchmark for Competition Policy

CentER Discussion Paper No. 2003-03

Posted: 14 May 2004

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Multiple version iconThere are 2 versions of this paper

Date Written: January 2003

Abstract

This paper introduces optimal competition: the best form of competition in an industry that a competition authority can achieve under the information constraint that it cannot observe firms' effciency levels. We show that the optimal competition outcome in an industry becomes more competitive as more money is spent in the industry, as the competition authority puts less weight on producer surplus and more weight on employment. The relation between competition and entry costs is U-shaped. Finally conditions are derived under which Cournot competition is too competitive compared to the optimal competition outcome.

Keywords: Competition, competition policy, objectives of competition policy, liberalization vs. regulation

JEL Classification: D4, L4, L5

Suggested Citation

Boone, Jan, Optimal Competition: A Benchmark for Competition Policy (January 2003). CentER Discussion Paper No. 2003-03, Available at SSRN: https://ssrn.com/abstract=545503

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
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+31 13 466 2399 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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