Risk-Averse Rent Seekers and the Social Cost of Monopoly Power
There is now quite general recognition that the social cost of monopoly power encompasses the resources expended by individuals seeking to become the beneficiaries of monopoly rents. However, since the activity of rent seeking is generally not observable, direct estimates of resources expended in quests to acquire monopoly power are usually impossible to come by.1 As a consequence, the indirect approach of taking the observed value of monopoly rents as indicative of the unobserved value of the resources expended in rent seeking is quite generally adopted in approaches to evaluation of the social cost of such activity.
KeywordsRisk Aversion Social Cost Risk Averse Relative Risk Aversion Monopoly Power
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