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Economic Rents Extracted in the Process of Consumption

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  • Harashima, Taiji

Abstract

The process of consumption has generally been regarded as a result of economic inequality, not as a source of it. However, in this paper, I show that firms obtain economic rents from consumers in the process of consumption because firms manipulate consumers by placing “lawful” disinformation into their advertisements. I examine the mechanism underlying these economic rents based on models of ranked information and economic rents derived from mistakes in business deals. I show that there is the optimal level of lawful disinformation in advertisements that differs depending on the average consumer’s abilities to discover disinformation. Therefore, it is likely that a huge amount of money is always extracted from households (consumers) in the process of consumption by firms that routinely engage in manipulation via dissemination of legal disinformation, which can lead to high levels of economic inequality. Hence, appropriate government interventions with regard to these economic rents are required.

Suggested Citation

  • Harashima, Taiji, 2023. "Economic Rents Extracted in the Process of Consumption," MPRA Paper 119012, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:119012
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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