When producer surplus underestimates rents
This paper demonstrates for the long run that producer surplus exactly equals the sum of rents paid to competitively purchased inputs and fails to account for rents paid to monopsonized inputs. Therefore, in the long run, whenever one or more inputs are subject to monopsony buying power, producer surplus underestimates rents. Because the concept of producer surplus is often used to help compare the welfare effects of alternative economic policies, the result is significant. Copyright International Atlantic Economic Society 2001
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Volume (Year): 29 (2001)
Issue (Month): 4 (December)
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- Roy Boyd & Kerry Krutilla, 1992. "Controlling acid deposition: A general equilibrium assessment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(3), pages 307-322, May.
- Bruce A. Babcock & William E. Foster, 1992. "Economic Rents Under Supply Controls with Marketable Quota," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 630-637.
- Hazilla, Michael & Kopp, Raymond J, 1990. "Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 853-73, August.
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