Long-run equilibrium and total expenditures in rent-seeking

  • William J. Corcoran

Abstract

The lure of excess profits or rents associated with monopoly power gives rise to expenditures to obtain these rents. Competitive rent-seeking behavior is recognized as a factor which must be included among the wastes associated with monopoly power (Tullock, 1967; Posner, 1975).1 The expenditures are aimed at transferring wealth rather than its creation, and the use of resources to obtain this transfer is a loss to society. How important rent-seeking is as a part of the total monopolistic waste hinges on the size of the total expenditures induced by a given level of excess profits.

Keywords

Marginal Cost Total Expenditure Monopoly Power Individual Expenditure Perfect Competition 
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Notes

  1. 1.
    Competition as used here refers to rivalrous behavior which implies that a degree of influence can be exerted by each participant in determining the outcome; this is markedly different from perfect competition, where each is powerless to affect the price (see McNulty, 1968).Google Scholar
  2. 3.
    See, for example, Varian (1978: 60).Google Scholar
  3. 4.
    The variation of profits with r can be determined by taking the derivative, d/dr (P(n +r—nr)/n 2 ). This result in P(1-n)/n 2,which indicates a negative relationship between profits and r,the marginal cost, for n/1. Google Scholar
  4. 5.
    More exactly, it involves the time for the number of players necessary to obtain equilibrium to be informed.Google Scholar
  5. 6.
    This would occur where an innovator could not capture the total consumer’s surplus of a newly introduced product.Google Scholar

Copyright information

© Springer Science+Business Media New York 2001

Authors and Affiliations

  • William J. Corcoran
    • 1
  1. 1.Economics ProgramUniversity of NebraskaOmahaUSA

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