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Competition Policy
Competition Policy
Competition Policy
Competition Policy
• There are obvious examples where the consumer surplus can be very small while the allocation is efficient (example: perfect price discrimination of a monopolist). • Using consumer surplus instead of total surplus might reflect a specific social welfare function, namely, one in which more emphasis is put on “consumers” than on “firms” • This is not, however, good economics: Firms are owned by somebody – namely, consumers Reducing firm profits thus makes (some) consumers worse of (because they get less dividend and therefore can consume less) Consumers can consume a product (e.g. broadband) and suffer from too high prices and at the same time benefit from it (if they hold shares of DTAG) • Thus, distributional effects of favoring consumer surplus are not clear as such (although one suspects that those holding shares are those with above average wealth – i.e. favoring consumer surplus might favor low wealth consumers in the end). • Some economists argue that in most applications it does not make a big difference whether to use consumer or producer surplus, since usually both move in the same direction in practice and thus yield the same policy recommendation.
Competition Policy
Competition Policy
Competition Policy
Competition Policy
Competition Policy
Competition Policy
Competition Policy
Competition Policy
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