The Efficiency Gains from Deregulation
AbstractWe analyze the efficiency gains from deregulating monopolies using an equilibrium rent seeking model. McCormick, Shughart and Tollison (1984) argue that the initial effort to establish regulation dissipates the monopoly profit, limiting the gain from deregulation to the efficiency cost of monopoly. We establish conditions under which this proposition holds; in particular, the initial rent seekers must fail to anticipate the possibility of deregulation. Additionally, through application of the standard rent seeking model, we establish that the potential welfare gains exceed the cost of achieving deregulation. Our results provide support for policies aimed at eliminating monopoly and other types of economic distortion. Copyright 1997 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 12 (1997)
Issue (Month): 1 (July)
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Web page: http://www.springerlink.com/link.asp?id=100298
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- Lee, Sanghack & Cheong, Kiwoong, 2005. "Rent dissipation and social benefit in regulated entry contests," European Journal of Political Economy, Elsevier, vol. 21(1), pages 205-219, March.
- Kang, Jae Hyeong & Lee, Sanghack, 2001. "The social cost of entry contest in Cournot-Nash oligopoly," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 139-152.
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