Under what conditions competition between businesses benefits customers?

Y. B. Karasik,
Thoughts Guiding Systems Corp.,
Ottawa, Canada.
e-mail:karasik@sympatico.ca

Is competition between businesses always good for customers? On the one hand we have such examples as competition between giants, for instance, between Apple and Samsung, which indeed benefits customers in the form of lowering prices, increasing the quality of devices, their versatility, etc. On the other hand competition between dentists or garages does not result in lowering prices or increasing the quality of work, but rather in the ever increasing rip off.

My current dentist was good until recently. He did not a bad job, did not intentionally damage teeth so that I would come to see him again, etc. But recently competition started to take its toll on him. In pursuit of increasing revenue he started accepting more patient without dental insurance, which could not pay the full price as per the fee guide. As a result he started treating two patient at the same time, one insured and one uninsured, putting them in separate rooms and running back and forth between them. The total amount of time spent on both was the same as previously on one. But now it was translated into more money. The insured person paid him as per the insurance fee guide and the uninsured person paid him a fraction of that. That was just a beginning. To increase revenue by expanding the number of patients without insurance (which are in the majority) he started intentionally damage my teeth so that I would come more frequently and subsidize more uninsured patients. The last straw that broke the back of the camel was his proposition: "You don't pay anything, your insurance pays. Let me start charging you more than the insurance company pays for a procedure." At this point I quit. But other dentists are no better and are simply on other stages of evolution under the pressure of competition. Eventually I will have to leave them too. Over the last 20 years I changed 6 dentists for this reason. Surprisingly, none of them went out of business.

The same goes for garages. Frequently there is another customer (a relative, friend, just a needed person, or who know else) which lies in wait for a pray like me, that would come and pay for my and his repairs. Once I came to a shop for a small repair and heard as the owner said to a man sitting in the waiting room: "I will charge him a thousand bucks and you will pay just two hundred." I immediately left but that garage is still in business.

There is no proverbial "honest mechanic" or "honest dentist", etc. That is why for the last 15 years I maintain and fix my cars myself despite making six figures a year. Thanks to my dad who tought me the skills and YouTube, which posts the videos of how to do various repairs. Unfortunately, I cannot treat my teeth myself.

So, when does competition between businesses benefit customers? And which customers? It looks like it depends on the size of businesses. Competition between big corporations benefits all customers but competition between small businesses benefits some at the expense of others. May be it is a stretch but competition alone definitely does not guarantee the best quality of goods and services for all. There are other factors involved, which have to be investigated.