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Competition has been modelled in the literature in a number of ways.What do these different parametrizations of competition have in common?For instance, it turns out that it is not always the case that a rise in competition reduces price cost margins, industry wide profits or concentration.All parametrizations of competition, considered here, have two features in common.First, the reallocation effect: a rise in competition raises the profits of a firm relative to the profits of a less efficient firm.Second, a rise in competition reduces the profits of the least efficient firm active in the industry.
Original languageEnglish
Place of PublicationTilburg
Number of pages37
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper


  • competition
  • industrial concentration
  • profit


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