A Comment on Monopoly Rents in our Economy (a wee wonkish) The optimum output position for a firm in the competitive model is simply MC=MR. There is no profit per se, only the value of the marginal product of capital as its return. Perfect competition,in equilibrium is said to eliminate any monopoly rent and any excess return to capital that operates to induce additional resources into that industry. Monopoly rent derives from an ability to raise price and curtail output from the optimum output level even minimally. Such rents can derive from geographic factors, structural aspects (e.g., stadia concession franchises), legal accommodations, collusion, branding, intellectual property rights, product differentiation, trade dress development and many other analogous elements, and of course from and in the absence of perfect competition, naturally or otherwise. I agree with Krugman and Stiglitz than monopoly rents abound and are rampant in our economy, particularly with the demise and misunderstandings of antitrust law. INDEED, A MAJOR PART OF NORMAL BUSINESS ENDEAVOR FOR A FIRM IS TO ACQUIRE AND DEVELOP MONOPOLY RENTS AS A MEANS OF INCREASING ITS SO-CALLED "PROFITS." The antitrust laws misconceive the problem and think that a producer in an “industry” is a “monopolist” almost per se if he acquires a dominate market share (51 percent in times past) or does not have a significant price competitor. A most naive view on monopoly rents, I think, that makes those laws essentially useless.
Posted on: Tue, 02 Jul 2013 22:22:02 +0000
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