The common pool of transitional profits

The common pool of transitional profits Transitional profits are above-normal profits that can be earned by firms as a result of changes in market conditions or entrepreneurial innovations of the firm. They are a common pool and are competed away by firms that enter profitable markets or imitate the innovations of profitable firms. The economics literature provides two conflicting views on transitional profits. One is that above-normal profit is a sign of economic inefficiency and is the result of either monopoly power or disequilibrium. The other is that economic profit is necessary for economic efficiency because profit is the lure that pushes entrepreneurs to allocate resources more efficiently. Both views are considered, along with an analysis of whether this common pool resource is competed away too rapidly, as the theory of common pool resources would suggest. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Austrian Economics Springer Journals

The common pool of transitional profits

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Publisher
Springer US
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Public Finance & Economics; Political Science, general; Methodology and the History of Economic Thought
ISSN
0889-3047
eISSN
1573-7128
D.O.I.
10.1007/s11138-013-0234-8
Publisher site
See Article on Publisher Site

Abstract

Transitional profits are above-normal profits that can be earned by firms as a result of changes in market conditions or entrepreneurial innovations of the firm. They are a common pool and are competed away by firms that enter profitable markets or imitate the innovations of profitable firms. The economics literature provides two conflicting views on transitional profits. One is that above-normal profit is a sign of economic inefficiency and is the result of either monopoly power or disequilibrium. The other is that economic profit is necessary for economic efficiency because profit is the lure that pushes entrepreneurs to allocate resources more efficiently. Both views are considered, along with an analysis of whether this common pool resource is competed away too rapidly, as the theory of common pool resources would suggest.

Journal

The Review of Austrian EconomicsSpringer Journals

Published: Jul 25, 2013

References

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