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Date: | Fri Mar 31 17:18:47 2006 |
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I'm not sure about the historiography, but it seems apparent to me that
activities such as false advertising, intimidation, slander, sabotage, arson
and thuggery all fit well within the definition of competitive behaviour,
yet clearly all are antisocial and counterproductive. Policing such
behaviour expends resources even in perfectly competitive markets. This fact
points to a weakness in the standard model of perfect competition. If
functioning of the model relies on competitive drives, enforcement costs
relating to negative competitive behaviour must be factored into efficiency
determinations. When enforcement costs exist, a competitive industry cannot
operate at the socially optimal level of output. Such 'enforced competion'
may be better than 'excessive competition' in net surplus terms, but it
still has a deadweight loss attached to it.
Adam McHugh
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