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Democracy and competition: Vertical differentiation and labor in a general equilibrium model
Author(s) -
Kahloul Amani,
LahmandiAyed Rim,
Lasram Hejer,
Laussel Didier
Publication year - 2017
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12256
Subject(s) - duopoly , monopoly , microeconomics , preference , competition (biology) , economics , quality (philosophy) , population , product differentiation , cournot competition , ecology , philosophy , demography , epistemology , sociology , biology
We consider a general equilibrium model with vertical preferences and one or two firms, where workers and consumers are differentiated, respectively, by their sensitivity to effort and their preference for quality. The question in this paper is whether a decentralized choice through majority vote would lead to more or less competition. We compare the duopoly and the monopoly cases from the viewpoint of each individual, then we deduce the choice of the majority. We prove that, under concentrated ownership (where owners have a null density), duopoly is always preferred by the majority; while under egalitarian ownership (where firms are equally shared by all the population), the choice of the majority depends on the relative size of workers' and consumers' segments.