Title: The Social Costs of Monopoly and Regulation: Posner Reconsidered Again
Abstract: This paper establishes three analytical propositions that measure the aggregate resources wasted by firms competing in a rent-seeking contest. The propositions are derived from a model of monopoly rent-seeking where firms are assumed to compete in a contest in which the outcome is determined probabilistically. The model embodies an assumption that the rent-seeking rivals are differentially situated in terms of the ease with which monopoly can be obtained. The paper considers a special case where an incumbent in a monopoly franchise conferred by a governmental body enjoys a unique comparative advantage in the effectiveness of its rent- seeking expenditures. In that case it is shown, inter alia, that the maximum value of the monopoly rent dissipated by all the rent-seeking rivals can be measured with reasonable accuracy if the number of rivals and the marginal advantage of the incumbent are known or can be reliably estimated.
Publication Year: 1998
Publication Date: 1998-05-11
Language: en
Type: article
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