Comparative Advantage
Categories: Financial Theory, Econ, Metrics, International, Tech
Shaq has a comparative advantage over you in a game of basketball. (Sorry.)
In finance, it means that one company has the ability to produce goods and/or services at a lower cost or more efficiently than another company in the same industry. It's being better at a certain economic game compared to the competition. "Absolute advantage" is different; it implies that one company is the best sprocket-washer or window-pelter. Comparable advantage is more concerned with the costs of one particular step in the process of sprocket-washing or window-pelting.
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