Question
Hi there. I have a question about market equilibration through rent-seeking. Here is the model. Initially a market for a good is in competitive equilibrium
Hi there. I have a question about market equilibration through rent-seeking. Here is the model. Initially a market for a good is in competitive equilibrium so participants trade at the equilibrium price. Then there's a change from outside the model, which is that demand for the good decreases. So the demand curve for the market shifts down. Because the market is now in disequilibrium and there's economic rent, participants would trade at a different price from the previous equilibrium price. This continues until they got a new equilibrium for the market. In this situation, who will gain economic rents? I think it is demanders who gain rents while suppliers or producers do not...
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