9 Competition and Government Policy

中国科大2012年暑期课程——经济学原理

“The Economic Way of Thinking” 12th EditionChapter 09 Competition and Government Policy

学习目的 理解竞争作为一个过程的概念 理解政府政策的影响

中国科大2012年暑期课程——经济学原理

Chapter OutlineCompetition as a Process The Pressures of Competition Controlling Competition Restrictions on Competition Competition for the Key Resource Competition and Property Rights The Ambivalence(矛盾) of Government Policies2

中国科大2012年暑期课程——经济学原理

Chapter OutlineSelling Below Cost What is the Appropriate Cost?“Predators” and Competition Regulating Prices“Antitrust” PolicyInterpretations and Applications Vertical Restraints: Competitive or Anticompetitive The Range of Opinion

Toward Evaluation3

中国科大2012年暑期课程——经济学原理

Competition as a ProcessWe often use the term competition in everyday language to refer to an activity that individuals engage in. E.g.以低价竞争，竞相推出新产品和服务…

In mainstream economics, however, the notion of competition represents a state of affairs(事态)4

中国科大2012年暑期课程——经济学原理

Competition as a ProcessA perfectly competitive market(完全竞争市场) is said to exist when…There are a large number of buyers and sellers, and nobody possesses market power Market participants possess full and complete information of alternatives Sellers produce a homogeneous(同质的) product There is costless mobility of resources The economic actors are price takers5

中国科大2012年暑期课程——经济学原理

Competition as a ProcessThe logic of perfect competition results in a hypothetical optimal allocation of resources and zero economic profit. However, the use of this basic model has serious costs to our economic understanding.

中国科大2012年暑期课程——经济学原理

Competition as a ProcessThe perfect competition modelobscured the institutional framework that underlies a functioning economic system (to be examined in Ch. 11) overlooked the dynamic and multifaceted nature of exchange behavior on the market (as discussed in Ch. 7)

中国科大2012年暑期课程——经济学原理

Competition as a ProcessIgnored the entrepreneurial adjustment process that is at the center of the robust nature of market economies and the source of their vibrancy(活力) that is the engine of economic growth and prosperity in the modern world.忽略了企业家调整过程，这个过程是稳健市场经济的核心，是市场经济活力的源泉，而这种活力是当代世界经济增长和繁荣的发动机.

中国科大2012年暑期课程——经济学原理

Competition as a ProcessThe perfect competition model focuses on that state of affairs that occurs after all this activity has taken place, after all adjustments have been successfully accomplished.There is a prereconciliation(预先协调) of economic plans in the model, not an explanation of how economic actors engage in exchange and production activity to realize the gains from exchange, which if pursued to its logical limit would exhaust all potential gains.9

中国科大2012年暑期课程——经济学原理

Competition as a ProcessModern theory of perfect competition has beena major intellectual error that has led to confusion in both economic theory and public policy.

中国科大2012年暑期课程——经济学原理

The Pressures of Competiti

onAll sellers facing demand curves that are less than perfectly elastic will maximize net revenue by restricting sales or output and keeping the selling price above marginal costUnless they can practice“perfect” price discrimination.

中国科大2012年暑期课程——经济学原理

The Pressures of CompetitionOne problem:Price> Marginal Cost Invites Competition

ExamplePiece of pie costs 50 cents to produce Seller sells the pie for$1.50

中国科大2012年暑期课程——经济学原理

The Pressures of CompetitionP$1.50Price

D

Temptation!

.50

Marginal cost

Q13

中国科大2012年暑期课程——经济学原理

Controlling CompetitionWhy don’t sellers agree not to compete? Answer: High transaction costs!Collusion is illegal Difficult to devise agreement Collusion may attract other firms

中国科大2012年暑期课程——经济学原理

Controlling CompetitionWhat about Cartels?Cartels are fragile To be successful for its membersMust prevent competition among members Stop new competitors from entering the market

中国科大2012年暑期课程——经济学原理

Restrictions on CompetitionOften entrepreneurs (or the people they employ) will seek to legally restrict the market in order to preserve their own profit (and wage) opportunities. Nobody hates increased competition more than the already-established enterprises.

中国科大2012年暑期课程——经济学原理

Restrictions on CompetitionIn reality, special-interest groups seek to legally restrict entryThey are trying to reduce uncertainty, at least for themselves, by preventing price cutting and keeping out competitors.

If they succeed in their efforts, don’t they secure for themselves something close to a guaranteed profit (有保证的利润)?

中国科大2012年暑期课程——经济学原理

Restrictions on CompetitionThe example of mousetrap patent(捕鼠器专利) QuestionA guaranteed profit?

中国科大2012年暑期课程——经济学原理

Restrictions on CompetitionWhat is the source of this“profit”? Answer:It is the patent which prevents competition from eroding the difference between your total revenue and your total costs.

Have you accurately calculated the cost of producing these superior mousetraps?

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