Mathew K. answered • 03/25/19
Vanderbilt Trained Econ Instructor w/ 3+ years in college classrooms
An common example of waste induced by competition is advertising expenditures. Coke and Pepsi spend billions each year on convincing you to drink their product over their competitor. However, those funds do little to actually create value for consumers- everyone is already informed as to what coke and pepsi are, and likely has a preference already. Instead, those funds are essentially wasted from a social point of view. For the firms individually, this choice is rational- their advertising spending gains them sales at the expense of their competitors, and if they spent less on their own, they would be at a disadvantage. But collectively, this activity is wasteful.
