Another view of the social costs from rent seeking

Abstract

No matter whether the Posner or the game theory approach for measuring rent-seeking losses is utilized, the trapezoidal social costs of monopoly are significantly greater than the Harberger deadweight triangle allocative efficiency losses. This means public policy can improve social welfare in any country by reducing nonnatural monopolies.

Acknowledgement

I am indebted to Donald Keenan and David B. Robinson for their comments and suggestions.

Notes

¹ This example is still cited in such widely used IO texts as Shughart (1997, p. 58).

² The losses would be even bigger if the monopoly suffers from x-inefficiency or organizational slack.