|WikiProject Economics||(Rated Start-class, High-importance)|
This page is archived by ClueBot III.
Is consumer surplus affected by competition?
I think a clarification on this issue would be helpful. Does increased competition reduce my consumer surplus? An example will help:
I am looking to buy a car that I would pay $30,000 for but it is on sale for $20,000. My consumer surplus is therefore $10,000. However I then hear that another dealer will sell me an identical car for $22,000. Now I will still take the first option. But it is no longer the case that I am willing to pay $30,000 for it. I will in fact only be willing to pay $22,000 for it. If the first dealer raised the price above that, I would go to the second dealer. Does that mean my consumer surplus is now only $2,000? That kind of makes it seem that I am worse off, when I am clearly not.