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INCOMPLETE OWNERSHIP, RENT DISSIPATION, AND THE RETURN TO RELATED INVESTMENTS
Author(s) -
Deacon Robert T.
Publication year - 1994
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1994.tb01357.x
Subject(s) - economics , microeconomics , deadweight loss , resource (disambiguation) , welfare , natural resource economics , general equilibrium theory , elasticity of substitution , work (physics) , production (economics) , market economy , computer science , mechanical engineering , computer network , engineering
The welfare loss from free access resource use is examined in a general equilibrium model. Actions that intensify competition for the resource, either by lowering the private cost or raising the private benefit of using it, can raise this loss above the rent the resource would earn if owned. Such ‘excess dissipation’is illustrated with examples applicable to unowned groundwater. Regulatory policies that fix inputs needed to acquire the resource work by transferring part of the resource's rent to controlled inputs. The resulting welfare effect depends on the elasticity of substitution between, and relative prices of, controlled and uncontrolled inputs.