8. The dynamics of competition and a competetive market process

Short run benefits from competition

Lower prices for consumers

Increased choice for consumers

X efficiency

Non price competition

Long run benefits of competition

Lower long term prices

Increase innovation → technological advancements → product quality and lower price

Incentives for sustainable and ethical → corporate social responsibility

Creative destruction

The process by which the introduction of new technologies renders existing ones obsolete

Examples of creative destruction

Streaming platforms to DVD rentals

Internet/online news to newspapers

Pros and cons of creative destruction

pros

• Better service/quality product

• Often makes markets more contestable

• Can lower price

• Creates new types of jobs

• Sign of competion

• Change market structure from monopoly

cons

• structural unemployment

• Unemployed may not be sufficiently skilled to take on new jobs