Understanding Economic Competition: Effects, Regulation, and Characteristics

1. What is economic competition?

The set of actions that undertakings (companies) take to obtain the preference of consumers, these actions include rivalry among companies and are only feasible because there are conditions that facilitate open and participative markets.

2. Mention and describe at least three negative effects that occur in markets when there are no conditions of effective competition.

• There are no alternatives in goods and services
• High prices
• There is no innovation, which causes inefficiency

3. What is the difference between economic regulation and the correct policy of economic competition? Describe at least two differences.

Regulation: Preserve the most valued elements by a given group through mechanisms of standard setting, information gathering and behavior modification.

Policy-right: are to correct or maintain economic competition. It is a tool of the state to promote free competition and economic concurrence.

4. What do the concepts of dynamic competition and static competence refer to?

➤ Static competition: compete IN the market. Companies seek to sell goods and services to consumers in an existing market.

➤ Dynamic competition: compete FOR the market. Companies engage in rivalry between them to acquire market power and achieve internal goals.

5. What are the characteristics of a market in perfect competition? Describe at least two

• A Large Number of Buyers and Sellers

• No Buyers’ Preferences

• No one can influence prices

• There are substitute goods, therefore there is more efficiency in the markets.

6. Provide two examples of collusion.

1.- When two or more economic agents make an agreement to increase prices of certain products or decrease the production.

2.- When they decide to divide the market territorially.

7. What dimensions are necessary according to the Federal Economic Competition Law to define the Relevant Market?

Product-Service: Defining the market from the possibility of substituting the good or service in question for others.

Geographic: Defining the market from its location (distribution costs, consumer costs of accessing other markets for the same good, regulatory restrictions)