Democracy and competition: Vertical differentiation and labor in a general equilibrium model

Amani Kahloul (1) , Rim Lahmandi-Ayed (2) , Hejer Lasram (3) , Didier Laussel (3)

1 Université de Sousse
2 LEGI - Laboratoire d'Économie et de Gestion Industrielle [Tunis]
3 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

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.

Domains: Humanities and Social Sciences; Economics and Finance; Quantitative Finance [q-fin]

Amani Kahloul, Rim Lahmandi-Ayed, Hejer Lasram, Didier Laussel. Democracy and competition: Vertical differentiation and labor in a general equilibrium model. Journal of Public Economic Theory, 2017, 19 (4), pp.860 - 874. ⟨10.1111/jpet.12256⟩. ⟨hal-01793055⟩