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SSRN
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Who Seeks Quasi-Rents at the Shutdown Point?

SSRN Electronic Journal
2016
  • 1
    Citations
  • 1,152
    Usage
  • 1
    Captures
  • 0
    Mentions
  • 15
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    1
    • Citation Indexes
      1
  • Usage
    1,152
    • Abstract Views
      1,033
    • Downloads
      119
  • Captures
    1
  • Social Media
    15
    • Shares, Likes & Comments
      15
      • Facebook
        15
  • Ratings
    • Download Rank
      472,898

Article Description

It is rational for a profit-maximizing firm, Firm A, to discontinue production when the price of its output falls below the shutdown point. Firm A’s suppliers might, however, still lobby the government to rescue the firm, in what I call quasi-rent-seeking behavior. This is because part of Firm A’s variable cost is quasi-rent income from the perspective of its suppliers of services of specific production factors. The quasi-rents would disappear if Firm A went out of business, and they would not be fully replaced because the net returns to the specific production factors are low in their alternative uses. The suppliers of Firm A might thus have the incentive to use the political process to preserve the quasi-rents even though the owners of Firm A are indifferent to such attempts.

Bibliographic Details

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