Talk:Williamson tradeoff model

Rent-seeking
I'd have thought you could make a critique based on Tullock's rent seeking model as follows. If you allow mergers based on efficiency, the gains will be dissipated as potential acquirors struggle to capture the monopoly rent. So, you're better off prohibiting any merger that allows for monopoly profits. I don't know that Tullock would agree with this (not sure if I do either) and a quick Google doesn't turn up a source, but maybe someone can take a better look.JQ (talk) 12:35, 12 January 2010 (UTC)


 * I haven't been able to find anything with a quick search. Maybe it's a paper waiting to be written?radek (talk) 21:31, 12 January 2010 (UTC)

Error in Article?
"Suppose that a given industry is initially characterized by perfect competition and has a constant unit cost of production equal to c1 (assumed the same across all firms in the industry). Because of competition the market price of the good produced will be equal to this unit cost, which means that firms in the industry earn normal profits,"

Since "profit = revenue - cost", surely if market price = unit cost then companies will earn $0 profit not "normal profits". It's probably worth also clarifying that this further assumes fixed costs = 0, or that fixed costs are all included in unit costs. 94.170.72.59 (talk) 01:45, 23 January 2010 (UTC)


 * This is economic terminology which always confuses non economists - it's the difference between "economic profits" and "accounting profits". "Zero profits" and "normal profits" are essentially the same thing. It depends on how you specify costs. Or to put it another way, from the point of view of accounting a firm can still make a return on its (fixed) capital which it already owns; "normal profit". But since the capital has an opportunity cost (it could be sold), including the opportunity cost in the calculation of profits results in "zero profits".


 * I generally tried to follow the sources' use of the term. Same for "unit cost", though perhaps it would be clearer if "marginal cost" was used.radek (talk) 03:06, 23 January 2010 (UTC)