Quasi-Rent

Quasi-rents arise whenever two parties engage in a market transaction and one of them must invest in an asset that is highly specialized to that transaction. Relationship-specific assets have been variously called relation-specific assets, transaction-specific assets, specific assets, specialized assets, non-redeployable assets and idiosyncratic investments. Quasi-rent is the return to the owner of a relationship-specific asset over and above its opportunity cost. The critical feature of a quasi-rent, as is true of economic rent in general, is that the owner does not have to collect the rentin order to continue deploying the asset in its current, transaction-specific use. If the return to the owner of a relationship-specific asset fell to the value associated with its next-best alternative use – eliminating all quasi-rent –...