Economics Externalities Questions Medium
Private competition refers to the competition that occurs between individual firms in a market. It is driven by the pursuit of profit and the desire to gain a larger market share. Private competition focuses on maximizing individual firm's profits and efficiency, often leading to lower prices, improved quality, and innovation. In private competition, firms do not consider the external costs or benefits they impose on others, and their main objective is to maximize their own private gains.
On the other hand, social competition takes into account the external costs or benefits that firms impose on society as a whole. It considers the broader social welfare implications of firms' actions. Social competition aims to achieve an optimal allocation of resources and maximize social welfare by internalizing externalities. This means that firms take into account the costs or benefits they impose on others and adjust their actions accordingly.
The main difference between private and social competition lies in the consideration of externalities. Private competition focuses solely on individual firm's profits and efficiency, while social competition takes into account the broader social costs and benefits. By internalizing externalities, social competition aims to achieve a more efficient and socially optimal outcome.