Mark Armstrong, Apr 24, 2008
This paper discusses complementarities and tensions between competition policies and consumer protection policies. The paper argues that markets will often supply adequate customer protection without the need for extra public intervention. Special areas where intervention might be needed are discussed, including the need to combat deceptive marketing and the need to provide additional market transparency (about both headline prices and shrouded product attributes). A few instances are presented of how more intense competition can worsen the outcomes for some consumers. Situations in which poorly designed consumer policies can harm consumers are discussed, including how they can be used to protect incumbent suppliers, how they can relax competition between oligopolists, how they can reduce consumer choice, how they can focus on one aspect of market performance at the expense of others, and how they can lead consumers to take insufficient care in the market.