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The Social Costs of Monopoly and Regulation: A Game-Theoretic Analysis

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  • William P. Rogerson
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    Abstract

    The theory of rent-seeking is that monopoly profits attract resources directed into efforts to obtain these profits and that the opportunity costs of these resources are a social cost of monopoly. This article shows that monopoly rents remain untransformed to the extent that firms are inframarginal in the competition for them and thereby earn profits. Different fixed organization costs can produce inframarginal firms. In a situation where a monopoly franchise is periodically reassigned, the incumbent may possess an advantage in the next year's hearings. This also results in untransformed rents.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal Bell Journal of Economics.

    Volume (Year): 13 (1982)
    Issue (Month): 2 (Autumn)
    Pages: 391-401

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    Handle: RePEc:rje:bellje:v:13:y:1982:i:autumn:p:391-401

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    Cited by:
    1. Richard Higgins & William Shughart & Robert Tollison, 1985. "Efficient rents 2 free entry and efficient rent seeking," Public Choice, Springer, Springer, vol. 46(3), pages 247-258, January.
    2. Mantell, Edmund H., 1996. "The social costs of monopoly and regulation: Posner reconsidered again," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 36(2), pages 249-268.
    3. Mehlum, Halvor & Moene, Kalle, 2008. "King of the Hill Positional Dynamics in Contests," MPRA Paper 8084, University Library of Munich, Germany.
    4. Edward Millner & Michael Pratt, 1989. "An experimental investigation of efficient rent-seeking," Public Choice, Springer, Springer, vol. 62(2), pages 139-151, August.
    5. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, Springer, vol. 54(1), pages 63-82, January.

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