What are the negative effects of competition?

Answer 1

A disadvantage of competition can be the loss of local jobs, particularly in the manufacturing industry. As competition pushes prices of goods down firms may move offshore in search of cheaper labour in order to stay competitive. This can lead to some firms exploiting people in less developed countries and in extreme cases even child and or slave labour.

Some industries do not lend themselves to competition. The main example commonly used is the supply of water to residential homes. It does not make sense to have multiple sets of pipes running to each home. In an industry such as this it is cheaper to have a monopoly firm, regulated by government to insure fair price and a minimal level of service.