Monopoly as a 'Culture-History Fact': Knight, Menger, and the Role of Institutions

Journal of Institutional Economics, Forthcoming

35 Pages Posted: 24 Jun 2021

See all articles by Joseph T. Salerno

Joseph T. Salerno

Ludwig von Mises Institute; Auburn University ; Pace University - Lubin School of Business

Carmen-Elena Dorobat

Manchester Metropolitan Business School, Strategy Enterprise and Sustainability

Matthew McCaffrey

University of Manchester - Manchester Business School

Date Written: 2021

Abstract

Frank Knight’s theory of monopoly price has received relatively little attention in the literature on Risk, Uncertainty and Profit. We argue that Knight accepted and refined the monopoly price theory of Carl Menger and his followers. Knight highlights the difference between monopoly as an inevitable outcome of departures from perfect competition, and monopoly as a contingent or “culture-history fact.” In the latter case, coercive institutional barriers to potential competition shape the choice set of consumers and producers, and provide a crucial method for identifying monopoly gains. There are three benefits to this account of Knight’s contributions: it rehabilitates the focus on the institutional determinants of monopoly price, as opposed to the mainstream emphasis on market frictions and imperfections; it opens the way for a Mengerian monopoly price theory that seriously engages the study of institutions; and it adds new evidence and nuance to ongoing debates about Knight’s place in economics.

Keywords: Frank Knight, monopoly price, Carl Menger, institutions, Austrian economics

JEL Classification: B13, B25, B53, D42, L41, L43, O17, P48

Suggested Citation

Salerno, Joseph T. and Dorobat, Carmen-Elena and McCaffrey, Matthew, Monopoly as a 'Culture-History Fact': Knight, Menger, and the Role of Institutions (2021). Journal of Institutional Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3864193

Joseph T. Salerno

Ludwig von Mises Institute ( email )

Auburn, AL
United States
3343212113 (Phone)

HOME PAGE: http://www.mises.org

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States

Carmen-Elena Dorobat

Manchester Metropolitan Business School, Strategy Enterprise and Sustainability ( email )

Manchester
United Kingdom
M156BH (Fax)

Matthew McCaffrey (Contact Author)

University of Manchester - Manchester Business School ( email )

United Kingdom

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