The Price of Playing Fair: How Charging Everyone the Same Can Leave Consumers Worse Off
Imagine you have a business that earns zero economic profit. It exactly covers its costs, including the return needed to attract investors, but nothing more. Is this the end state of competition? Is there anything left for competition to do?
Sure. If another company comes along with lower costs, it can drive prices down. That’s always a possibility, and an important one in real markets. But is there anything else competition can do in the more traditional sense, where new rivals take time to enter a market but eventually erode profits?
There’s one more way to compete. Suppose a…
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