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Monopoly Exploitation and Rent-Seeking as an Inevitability of Capital Concentration

Author

Listed:
  • Ismar Velic

    (PhD student, University of Rijeka, Faculty of Economics and Business, Ivana Filipovića 4, 51000 Rijeka, Croatia)

  • Ljerka Cerovic

    (Full Professor, Ph.D., University of Rijeka, Faculty of Economics and Business, Ivana Filipovića 4, 51000 Rijeka, Croatia)

  • Dario Maradin

    (Assistant Professor, Ph.D., University of Rijeka, Faculty of Economics and Business, Ivana Filipovića 4, 51000 Rijeka, Croatia)

Abstract

The primary focus of this research is on the genesis of companies as the dominant assumption of their behavior, from perfect to deviant. The phenomenon of extraction of monopoly rents and its extremely negative effects on social welfare, such as rent-seeking, is assumed by the authors to be conditioned by the genesis of companies, and therefore, describes the nature of their activities and survival in the market. The paper attempts to interpret the relationship between the problems of inefficient production in monopoly markets as a necessity and inevitability caused by the genesis of monopoly companies. Furthermore, the paper synthesizes classical economic analysis of profit maximization in monopoly markets and the negative consequences that arise from it, with the Marxist analysis of the genesis of capitalistic companies. Regardless of the type of ownership profit maximization and competition represent a common denominator for both economic directions. The main thesis of the paper is that the free competition is a generator of capital accumulation, concentration and centralization as well as the most powerful tool for the eliminating market competitors. However, the competition battle does not stop with the market monopolization. It continues at higher levels of production and capital concentration, within and outside the limits of domestic market, whilst the goal becomes a tool ? capital to capital, with a tendency for further accumulation of all its negative consequences and connotations. Accordingly, the regulation of imperfect markets is becoming a necessity, thus the dialectical approach to regulation is proposed for various industries through principles and legal solutions for industries which respect specific characteristics of each market and the historical timing of the application of regulation.

Suggested Citation

  • Ismar Velic & Ljerka Cerovic & Dario Maradin, 2018. "Monopoly Exploitation and Rent-Seeking as an Inevitability of Capital Concentration," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(4), pages 552-564, April.
  • Handle: RePEc:asi:aeafrj:2018:p:552-564
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    References listed on IDEAS

    as
    1. Nicolae Marius Jula & Bogdan Buneci, 2013. "Critical Loss Of Social Welfare Under Monopoly," Working papers 06, Ecological University of Bucharest, Department of Economics.
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    More about this item

    Keywords

    Capital concentration; Company genesis; Free competition; Monopoly rent; Regulation; Social cost of monopoly.;

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B14 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Socialist; Marxist
    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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