The rental for uncertainty and oligopolistic equilibrium

Abstract

This dissertation is concerned with the imputation of rental income for entrepreneurial uncertainty. It begins with a review of the historical development of rent theory. Chapter I briefly summarizes contributions to the theory of rent from the time of the mercantilist economists to the neoclassical era. Chapter II considers the conditions giving rise to rents for functional inputs. It also considers the appropriate imputational procedures to be employed. It is shown that variable cost imputations are consistent with Marshall's view of rents. Chapters III and IV consider the rental income of nonfunctional inputs. In Chapter III Greenhut's model of entrepreneurial rents and competitive-oligopolistic equilibrium is considered. It is shown that the rental for nonfunctional inputs reflects the opportunity cost of the factor in question. In Chapter IV Greenhut's model of nonfunctional inputs is contrasted with Chamberlin's- It is shown that factor conformability requires production at optimum efficient scale. A utility-theoretic model of the market for entrepreneurial uncertainty is developed. This model indicates that factor conformability must always emerge in an industry characterized by competitive factor markets. Chapters V and VI are devoted to Baumol, Panzar, and Willig's model of monopolistic competition. Chapter V summarizes BP&VT's general theory of contestable markets. Chapter VI is more specifically concerned with an analysis of BPAW's behavioral postulates and monopolistically-competitive market structures. It is shown that BPAW's theory fails because their primary behavioral postulate, namely, that firms engage in entry-forestalling pricing behavior, is unacceptable under the assumption of fictionless entry and exit. Their theory also Tacks generality since it is based upon the fictional concept of the representative firm. Contrary to BP&Vs theory, it is shown that equilibrium is consistent with different industry configurations involving a multiplicity of size-distributions of firms...