Brand names and barriers to entry in political markets
The most obvious implication of this discussion is that barriers to entry in politics will raise the costs of governments transferring wealth. More generally, it will raise the cost of public provision of goods and services. In the case of transfers, the inefficiency created by barriers depends on whether one values government transfers. The total transfer — the transfer to the beneficiaries plus the politician's commission — is maximized by the politician who can create support the most efficiently. For other governmental services, which are viewed as efficiency creating (e.g., national defense), these barriers reduce the amount of a valuable output we desire to purchase. This result also supplies a possible efficiency explanation for the limitation on the number of terms imposed on the presidency and many governorships. Brand names are not really the barriers; information costs are what cause brand name to be used and are the more fundamental barrier to entry. What we are arguing is that private and not public organizations can in certain respects better overcome these information costs. Copyright Martinus Nijhoff Publishers 1986
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- Harold Demsetz, 1981.
"Barriers to Entry,"
UCLA Economics Working Papers
192, UCLA Department of Economics.
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