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Ivanov, Andrey V. and Mueller, Florian (May 2006): “Ineffective” competition: a puzzle? SFB/TR 15 Discussion Paper No. 117
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Abstract

Conventionally, we think of an increase in competition as weakly decreasing prices, increasing the number of consumers served, thus increasing consumer surplus, decreasing firms profits, etc. Here, we demonstrate that, under some tame circumstances, an increase in competition may lead to a price increase in a horizontally differentiated market. We show this relationship for the petrol market in German cities.