Spatial Monopoly, Natural Monopoly, Pure Profits, and Land Rents
We ask if pure profits obtained in our earlier model might be dissipated by forces excluded. We consider the possibility that the profits will be converted into land rents and usurped by landlords and conclude this will not happen. Second, we consider new firms entering to drive existing firms out and drive profits to zero. We conclude this will happen under certain circumstances but in an important subclass of circumstances pure profits persist indefinitely in free-entry equilibrium, and will not be competed away due to competition from potential or actual new entrants.
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