Paradox of competition

Paradox of competition in economics names a model of a situation where measures, which offer a competitive advantage to an individual economic entity, lead to nullification of advantage if all others behave in the same way. In some cases the finite state is even more disadvantageous for everybody than before (for the totality as well as for the individual). The term Paradox of competition (Konkurrenzparadoxon) was coined by German economist Wolfgang Stützel. It is about a case of a rationality trap. Stützel distinguishes three categories of paradoxes of competition: Circuit paradoxes Classical paradoxes Marx paradoxes Advertising: the overall demand for detergent is assumed steady. By advertisement the individual venture can expand its share in market at the expense of its competitors. But if all producers of detergent do the same, their expenses for advertisement rise without gaining higher sales at large, so that profits even decline. Opening hours: assumed the legislator extends the allowed opening hours by two hours. Now when an individual shop applies that new opening hours, though it has to pay more work, it can gain higher sales and thereby more profit. But if all shops practise the extended opening hours, customers can shop again at other shops with similar supply and the potential sales volume again allocates to all (similar) shops. Wage policy: for each individual country counts: a state can improve its price competitiveness in comparison with other states by a restrained wage policy. But from that it does just not follow that all countries (can) improve their competitiveness when they apply restrained wage policy. Current account balance: a current account surplus is to the expense of an others state current account deficit – insofar not all can improve their balance at the same time. On the contrary – if all simultaneously begin to cut down their imports they will have a decline of balance in their current account in the end. (see also: protectionism in the 1930s: Smoot–Hawley Tariff Act).