This paper presents a model and some highly tentative empirical estimates of the social costs of monopoly and monopoly-inducing regulation in the United States. Unlike the previous studies, it assumes that competition to obtain a monopoly results in the transformation of expected monopoly profits into social costs. A major conclusion is that public regulation is probably a larger source of social costs than private monopoly. The implications of the analysis for several public policy issues, such as appropriate policy toward mergers and price discrimination, are also discussed.
This article uses the concept of cone of interior displacements, which extends the notion of differentiability, to set up a characterization of Pareto optima in non-convex economies. A general theorem asserting that a Pareto optimum is a PA equilibrium is given and specifications are discussed. It is finally argued that the usual formulation of the doctrine of marginal cost pricingas a doctrine for achieving Pareto optimal states in a non-convex decentralized economy has unsatisfactory logical basis, and a way of defining a minimum degree of centralization inherent to non-convex economies is suggested. THE MAIN RESULTS of the economic theory of allocation of resources rest upon assumptions of convexity: convexity of production sets, and convexity of preferences. The relevance of these assumptions is often doubtful; even if in a many consumer economy the classical statements can be extended to the case of nonconvex preferences (this idea, pointed out first by Farrell [13] and Rothenberg [24], was developed in the general framework of economics with a continuum of agents as introduced by Aumann [4]; see W. Hildenbrand [18 and 19]), the indivisibilities arising in production are often large and create non-convexities that cannot be overlooked. Furthermore, non-convexities may arise with externalities (see Baumol [5], Kolm [20], and Starrett [25]), exchange of information (see Radner [23]), or stock markets (see Dreze [10]). Even if one must take the risk of producing less elegant results, a relevant economic theory cannot ignore non-convexities.