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

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  • William P. Rogerson

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.

Suggested Citation

  • William P. Rogerson, 1982. "The Social Costs of Monopoly and Regulation: A Game-Theoretic Analysis," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 391-401, Autumn.
  • Handle: RePEc:rje:bellje:v:13:y:1982:i:autumn:p:391-401
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    Cited by:

    1. Arye Hillman & Dov Samet, 1987. "Dissipation of contestable rents by small numbers of contenders," Public Choice, Springer, vol. 54(1), pages 63-82, January.
    2. Robert H. Frank & Philip J. Cook, 2013. "Winner-Take-All Markets," Studies in Microeconomics, , vol. 1(2), pages 131-154, December.
    3. Mantell, Edmund H., 1996. "The social costs of monopoly and regulation: Posner reconsidered again," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(2), pages 249-268.
    4. Will, Matthias Georg, 2012. "Successful organizational change through win-win: How change managers can organize mutual benefits," Discussion Papers 2012-20, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    5. R. Kenneth Godwin & Edward J. López & Barry J. Seldon, 2006. "Incorporating Policymaker Costs and Political Competition into Rent‐Seeking Games," Southern Economic Journal, John Wiley & Sons, vol. 73(1), pages 37-54, July.
    6. Usman Qadir, 2016. "Technology Acquisition, Catching Up and Competitiveness in Pakistan," PIDE-Working Papers 2016:134, Pakistan Institute of Development Economics.
    7. Susan Athey & Armin Schmutzler, 1999. "Innovation and the Emergence of Market Dominance," Working papers 99-18, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Mehlum, Halvor & Moene, Kalle, 2008. "King of the Hill Positional Dynamics in Contests," MPRA Paper 8084, University Library of Munich, Germany.
    9. Kyung Hwan Baik, 1994. "Winner‐Help‐Loser Group Formation In Rent‐Seeking Contests," Economics and Politics, Wiley Blackwell, vol. 6(2), pages 147-162, July.
    10. Jay S. Coggins, 1995. "Rent Dissipation And The Social Cost Of Price Policy," Economics and Politics, Wiley Blackwell, vol. 7(2), pages 147-166, July.
    11. Michael A. Brooks & Ben J. Heudra, 1989. "An Exploration of Rent Seeking," The Economic Record, The Economic Society of Australia, vol. 65(1), pages 32-50, March.
    12. Mushtaq H. Khan, 1996. "The efficiency implications of corruption," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(5), pages 683-696.
    13. Baik, Kyung Hwan & Kim, In-Gyu, 1997. "Delegation in contests," European Journal of Political Economy, Elsevier, vol. 13(2), pages 281-298, May.
    14. Will, Matthias Georg, 2012. "Change Management und Interaktionspotentiale: Wie Rationalfallen den organisatorischen Wandel blockieren," Discussion Papers 2012-9, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    15. Dijkstra, Bouwe R., 1998. "A two-stage rent-seeking contest for instrument choice and revenue division, applied to environmental policy," European Journal of Political Economy, Elsevier, vol. 14(2), pages 281-301, May.
    16. Ahn, T.K. & Isaac, R. Mark & Salmon, Timothy C., 2011. "Rent seeking in groups," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 116-125, January.
    17. Elie Ofek & Miklos Sarvary, 2003. "R&D, Marketing, and the Success of Next-Generation Products," Marketing Science, INFORMS, vol. 22(3), pages 355-370, July.
    18. Edward Millner & Michael Pratt, 1989. "An experimental investigation of efficient rent-seeking," Public Choice, Springer, vol. 62(2), pages 139-151, August.
    19. Matthew D. Mitchell, 2019. "Uncontestable favoritism," Public Choice, Springer, vol. 181(1), pages 167-190, October.
    20. Richard Higgins & William Shughart & Robert Tollison, 1985. "Efficient rents 2 free entry and efficient rent seeking," Public Choice, Springer, vol. 46(3), pages 247-258, January.
    21. Coggins, Jay S., 1992. "Rent Dissipation and the Social Cost of Price Policy," Staff Papers 200551, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    22. Coggins, Jay S., 1992. "Rent Dissipation And The Social Cost Of Price Policy," 1992 Annual Meeting, August 9-12, Baltimore, Maryland 271378, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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