Inequality And Competition Policy

By Bruce Lyons

Not all sources of competition reduce inequality by limiting prices and profits. In developed economies, globalization raises the payoff to those controlling the best products and puts downward pressure on the low paid. Antitrust to limit market power is an important force for restraining inequality, and economists have good reasons not to introduce explicit non-competition arguments, but Baker & Salop have recently opened a debate on whether inequality should be more actively considered. I provide a brief critique of their seven suggestions and add two of my own: empowering consumers to make competition more effective; and introducing inequality into the consideration of price discrimination.