Nominee

Concentrated Benefits and Dispersed Costs Rent-Seeking by Incumbents Against Innovative and Disruptive Web Based Firms

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"At a theoretical level, rent-seeking is likely where government action (or inaction) imposes concentrated benefits on a few and dispersed costs on many. Even though anticompetitive mergers and cartels lead to concentrated benefits on merging (or colluding) firms and dispersed costs on consumers, successful rent-seeking in these cases is relatively rare for three reasons. First, because firms are both producers and consumers, they are behind a Veil of Ignorance as to whether they will benefit (as a producer) or be harmed (as a customer) by a future anticompetitive merger or cartel and therefore prefer fair and objective rules. Second, fair and objective rules exist in the case of mergers (the Herfindahl-Hirschman index) and cartels (per se illegality). Third, agencies (at least in the United States) must bring their case to a common law court that has full discovery and a developed common law of competition. This is important because courts are less susceptible to rent-seeking than other bodies of government. "