Monopoly Exploitation and Rent-Seeking as an Inevitability of Capital Concentration

Ismar Velić (), Ljerka Cerović () and Dario Maradin ()

Asian Economic and Financial Review, 2018, vol. 8, issue 4, 552-564

Abstract: The primary focus of this research is on the genesis of companies as the dominant assumption of their behavior, from perfect to deviant. The phenomenon of extraction of monopoly rents and its extremely negative effects on social welfare, such as rent-seeking, is assumed by the authors to be conditioned by the genesis of companies, and therefore, describes the nature of their activities and survival in the market. The paper attempts to interpret the relationship between the problems of inefficient production in monopoly markets as a necessity and inevitability caused by the genesis of monopoly companies. Furthermore, the paper synthesizes classical economic analysis of profit maximization in monopoly markets and the negative consequences that arise from it, with the Marxist analysis of the genesis of capitalistic companies. Regardless of the type of ownership profit maximization and competition represent a common denominator for both economic directions. The main thesis of the paper is that the free competition is a generator of capital accumulation, concentration and centralization as well as the most powerful tool for the eliminating market competitors. However, the competition battle does not stop with the market monopolization. It continues at higher levels of production and capital concentration, within and outside the limits of domestic market, whilst the goal becomes a tool – capital to capital, with a tendency for further accumulation of all its negative consequences and connotations. Accordingly, the regulation of imperfect markets is becoming a necessity, thus the dialectical approach to regulation is proposed for various industries through principles and legal solutions for industries which respect specific characteristics of each market and the historical timing of the application of regulation.

Keywords: Capital concentration; Company genesis; Free competition; Monopoly rent; Regulation; Social cost of monopoly. (search for similar items in EconPapers)
Date: 2018
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