Editing Competition (section)

==Economics==
{{Main|Competition (economics)}}

Merriam-Webster gives as one definition of competition (relating to [[business sector|business]]) as "[...] rivalry: such as [...] the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms".<ref>Compare: [http://m-w.com/dictionary/competition Definition of competition] - "competition [...] 1 : the act or process of competing : rivalry: such as [...] a : the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms "</ref> [[Adam Smith]] in his 1776 book ''[[The Wealth of Nations]]'' and later economists described competition in general as allocating productive [[resource]]s to their most highly valued uses and encouraging [[X-inefficiency|efficiency]].<ref>[[George J. Stigler]] ([[The New Palgrave: A Dictionary of Economics|[1987]]] 2008). "competition," ''[[The New Palgrave Dictionary of Economics]]''. [http://www.dictionaryofeconomics.com/article?id=pde2008_C000261&q=competition&topicid=&result_number=6 Abstract.] {{Webarchive|url=https://web.archive.org/web/20150215032134/http://www.dictionaryofeconomics.com/article?id=pde2008_C000261&q=competition&topicid=&result_number=6 |date=2015-02-15 }}</ref>{{request quotation|date=March 2020}} Later [[microeconomic theory]] distinguished between [[perfect competition]] and [[imperfect competition]], concluding that no system of resource allocation is more efficient than [[perfect competition]].{{citation needed|date=March 2020}} Competition, according to the theory, causes commercial firms to develop new products, services and technologies, which would give consumers greater selection and better products. The greater selection typically causes lower prices for the products, compared to what the price would be if there was no competition ([[monopoly]]) or little competition ([[oligopoly]]).{{citation needed|date=March 2020}}

However, competition may also lead to wasted (duplicated) effort and to increased [[cost]]s (and prices) in some circumstances. For example, the intense competition for the small number of [[superstar|top jobs in music and movie-acting]] leads many aspiring musicians and actors to make substantial investments in training which are not recouped, because only a fraction become successful. Critics{{which|date=March 2020}} have also argued that competition can be destabilizing, particularly competition between certain financial institutions.

Experts have also questioned the constructiveness of competition in profitability. It has been argued that competition-oriented objectives are counterproductive to raising revenues and profitability because they limit the options of strategies for firms as well as their ability to offer innovative responses to changes in the market.<ref>{{cite journal |url= http://marketing.wharton.upenn.edu/documents/research/CompOrientPDF%2011-27%20%282%29.pdf |title= The Profitability of Winning |author1= J. Scott Armstrong |author2= Fred Collopy |journal= Chief Executive |pages= 61–63 |year= 1994 |access-date= 2011-12-06 |archive-url= https://web.archive.org/web/20100622023252/http://marketing.wharton.upenn.edu/documents/research/CompOrientPDF%2011-27%20(2).pdf |archive-date= 2010-06-22 |url-status= dead | quote = A 1996 review of the evidence, summarized in this paper, found that competitor-oriented objectives reduced profitability. We describe new evidence from 12 studies, one of which is introduced in this paper. The new evidence supports the conclusion that competitor-oriented objectives are harmful, especially when managers receive information about competitors' market shares.}}</ref> In addition, the strong desire to defeat rival firms with competitive prices has the strong possibility of causing [[price war]]s.<ref>{{cite journal |author1=J. Scott Armstrong |author2=Kesten C. Greene |year=2007 |title=Competitor-oriented Objectives: The Myth of Market Share |url=https://ijb.cyut.edu.tw/var/file/10/1010/img/853/V121-6.pdf |url-status=live |journal=International Journal of Business |volume=12 |issue=1 |pages=116–34 |issn=1083-4346 |archive-url=https://web.archive.org/web/20220911045115/https://ijb.cyut.edu.tw/var/file/10/1010/img/853/V121-6.pdf |archive-date=11 September 2022}}</ref>

Another distinction appearing in economics is that between competition as an end-state – as in the case of both perfect and imperfect competition – and competition as a ''process.'' It is a process of rivalry between firms (or consumers) intensifying selective pressures for improvements. One can restate this as a process of discovery.<ref>{{Cite journal|last=Blaug|first=Mark|title=Is Competition Such a Good Thing? Static Efficiency versus Dynamic Efficiency|date=2001|url=http://dx.doi.org/10.1023/a:1011160622792|journal=Review of Industrial Organization|volume=19|issue=1|pages=37–48|doi=10.1023/a:1011160622792|s2cid=154441911|issn=0889-938X|url-access=subscription}}</ref>

Three levels of end-state economic competition have been classified:{{by whom|date=March 2020}}
* The most narrow form is '''direct competition''' (also called "category competition" or "brand competition"), where [[product (business)|products]] which perform the same function compete against each other. For example, one brand of pick-up trucks competes with several other brands of pick-up trucks. Sometimes, two companies are rivals and one adds new products to their line, which leads to the other company distributing the same new things, and in this manner they compete.
* The next form is '''substitute''' or '''indirect competition''', where products which are close substitutes for one another compete. For example, butter competes with margarine, with mayonnaise and with other various sauces and spreads.
* The broadest form of competition is typically called '''budget competition'''. Included in this category is anything on which the [[consumer]] might want to spend their available [[income|money]]. For example, a family which has $20,000 available may choose to spend it on many different items, which can all be seen as competing with each other for the family's expenditure. This form of competition is also sometimes described as a competition of "share of wallet".

In addition, companies compete for [[finance|financing]] on the capital markets (equity or debt) in order to generate the necessary cash for their operations. [[Investor]] typically consider alternative investment opportunities given their risk profile, and not only look at companies just competing on product ('''direct competitors'''). Enlarging the investment universe to include '''indirect competitors''' leads to a broader peer universe of comparable, indirectly competing companies.

Competition does not necessarily have to be between companies. For example, [[business writer]]s sometimes refer to '''internal competition'''. This is competition within companies. The idea was first introduced by [[Alfred Sloan]] at [[General Motors Corporation|General Motors]] in the 1920s. Sloan deliberately created areas of overlap between [[Division (organization)|division]]s of the company so that each division would compete with the other divisions. For example, the [[Chevrolet]] division would compete with the [[Pontiac (automobile)|Pontiac]] division for some [[market segment]]s. The competing brands by the same company allowed parts to be designed by one division and shared by several divisions, for example parts designed by Chevrolet would also be used by Pontiac. In 1931 [[Procter & Gamble]] initiated a deliberate system of internal brand-versus-brand rivalry. The company was organized{{by whom|date=March 2020}} around different [[brand]]s, with each brand allocated resources, including a dedicated group of employees willing to champion the brand. Each [[brand manager]] was given responsibility for the success or failure of the brand, and compensated accordingly.

Most businesses also encourage competition between individual employees. An example of this is a contest between sales representatives. The sales representative with the highest sales (or the best improvement in sales) over a period of time would gain benefits from the employer. This is also known as '''intra-brand competition'''.

Shalev and Asbjornsen found that success (i.e. the saving resulted) of [[reverse auction]]s correlated most closely with competition. The literature widely supported the importance of competition as the primary driver of reverse auctions success.<ref name=":0">{{Cite journal |last1=Shalev |first1=Moshe Eitan |last2=Asbjornsen |first2=Stee |date=2010-03-30 |title=Electronic Reverse Auctions and the Public Sector – Factors of Success |url=https://papers.ssrn.com/abstract=1727409 |journal=Journal of Public Procurement |language=en |location=Rochester, NY |volume=10 |issue=3 |pages=428–452|ssrn=1727409 }}</ref> Their findings appear to support that argument, as competition correlated strongly with the reverse auction success, as well as with the number of bidders.<ref name=":0" />

Business and economic competition in most [[country|countries]] is often{{quantify|date=March 2020}} limited or restricted. Competition often is subject to legal restrictions. For example, competition may be legally prohibited, as in the cases of a [[government monopoly]] or of a [[government-granted monopoly]]. Governments  may institute [[tariffs]], [[subsidies]] or other [[protectionist]] measures in order to prevent or reduce competition. Depending on the respective economic policy, pure competition is to a greater or lesser extent regulated by [[competition policy]] and [[competition law]].  Another component of these activities is the [[discovery process]], with instances of higher [[government regulation]]s typically leading to less competitive businesses being launched.<ref>{{Cite journal |last=Kirzner |first=Israel M. |date=30 September 1982 |title=Competition, Regulation, and the Market Process: An "Austrian" Perspective |url=https://object.cato.org/sites/cato.org/files/pubs/pdf/pa018.pdf |url-status=live |journal=Cato Institute Policy Analysis |publisher=Cato Institute |issue=18 |archive-url=https://web.archive.org/web/20190802170609/https://object.cato.org/sites/cato.org/files/pubs/pdf/pa018.pdf |archive-date=2 August 2019}}</ref>

Nicholas Gruen has referred to ''The Competition Delusion'',<ref>{{Cite journal |last=Gruen |first=Nicholas |date=February 2020 |title=Trust and the competition delusion |url=https://www.griffithreview.com/articles/trust-competition-delusion-gruen/ |journal=Griffith Review |volume=67 |isbn=9781925773804}}</ref> in which competition is taken to be unambiguously good, even where that competition leaks into the rules of the game. He claims this drives financialisation (the approximate doubling of proportion of economic resources dedicated to finance and to 'rule making and administering' professions such as law, accountancy and auditing.

===Law===
{{Main|Competition law}}
[[File:U.S. Department of Justice headquarters, August 12, 2006.jpg|thumb|right |The [[United States Department of Justice|Department of Justice]] building in [[Washington, D.C.]] houses the influential [[United States antitrust law|antitrust]] enforcers of U.S. competition laws.]]
Competition [[law]], known in the [[United States]] as antitrust law, has three main functions:
* First, it prohibits agreements aimed to restrict free trading between business entities and their customers. For example, a [[cartel]] of sports shops who together fix football-jersey prices higher than normal is illegal.<ref>{{Cite court|litigants=JJB Sports PLC v Office of Fair Trading|court=CAT|opinion=1022/1/1/03|date=1 October 2003|url=https://www.catribunal.org.uk/cases/10221103-jjb-sports-plc}}</ref>
* Second, competition law can ban the existence or abusive behaviour of a firm dominating the market. One case in point could be a software company who through its [[monopoly]] on computer platforms makes consumers use its media player.<ref>In the E.U. side of the saga, see [https://curia.europa.eu/jcms/upload/docs/application/pdf/2009-02/cp070063en.pdf Case T-201/04] <br/>{{Webarchive|url= https://web.archive.org/web/20220210183724/https://curia.europa.eu/jcms/upload/docs/application/pdf/2009-02/cp070063en.pdf |date= 2022-02-10 }} ''Microsoft v. Commission'' Order, [revised] 17 September 2007</ref>
* Third, to preserve competitive markets, the law supervises the [[mergers and acquisitions]] of very large corporations. Competition authorities could for instance require that a large packaging company give plastic bottle [[license]]s to competitors before taking over a major [[Polyethylene terephthalate|PET]] producer.<ref>{{Cite court|litigants=Commission of the European Communities v Tetra Laval BV|court=EU Court of Justice|reporter=European Court Reports|opinion=Case C-12/03 P|date=15 February 2005|url=https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62003CJ0012}}</ref>

In all three cases, competition law aims to protect the [[consumer welfare|welfare of consumers]] by ensuring that each business must compete for its share of the [[market economy]].{{cn|date=April 2025}}