Download e-book for iPad: Antitrust and Economic Efficiency by Charles K. Rowley

By Charles K. Rowley

ISBN-10: 0333122151

ISBN-13: 9780333122150

ISBN-10: 1349011134

ISBN-13: 9781349011131

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It is essentially an empirical matter which will be re-examined in a subsequent section of this survey. The view that monopolists are better at appropriation than competitive firms is correct within the framework of laissez-faire, but does not hold up once patent legislation is envisaged. The issues raised by risk and uncertainty require further treatment, since One of the essential properties of the inventive process is that the outcome is so uncertain, and in an economy characterised by risk-aversion, unless facilities exist for the shifting of risk to those who are less risk-averse, or for risk reduction, private markets will discriminate against risky enterprises and, inevitably, will provide for a suboptimal allocation of resources to invention.

It is essentially an empirical matter which will be re-examined in a subsequent section of this survey. The view that monopolists are better at appropriation than competitive firms is correct within the framework of laissez-faire, but does not hold up once patent legislation is envisaged. The issues raised by risk and uncertainty require further treatment, since One of the essential properties of the inventive process is that the outcome is so uncertain, and in an economy characterised by risk-aversion, unless facilities exist for the shifting of risk to those who are less risk-averse, or for risk reduction, private markets will discriminate against risky enterprises and, inevitably, will provide for a suboptimal allocation of resources to invention.

Thus an inventor selling to the competitive industry would invest in inventing as long as the cost of the invention to him was less than P'. By contrast, in the monopoly case Arrow set the price at w to maintain that rate of output for which c=MR. The profit, P, is given by the rectangle cwxy. Following the invention, units costs would fall from c to c' and the new profitmaximising price would be p, yielding a new profit rectangle equal to P'. On this basis, Arrow concluded that the incentive to invent was less under monopolistic than under competitive 34 conditions.

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Antitrust and Economic Efficiency by Charles K. Rowley


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