Competition and Competitiveness in a New Economy

There is perhaps no topic that is more important for the functioning of a market economy than competition policy. The theorems and analyses stating that market economies deliver benefits in the form of higher living standards and lower prices are all based on the assumption that there is effective competition in the market. At the same time when Adam Smith emphasised that competitive markets deliver enormous benefits, he also emphasised the tendency of firms to suppress competition. Enterprises can generate far more profits by suppressing competition than by innovating and producing better products. It has thus become an important role of government to insure the maintenance of competition.