RoyaltyStat Blog

Oligopoly Profit Markup

Posted by Ednaldo Silva

Corporate profits should concern policymakers, including tax legislators and tax administrators.

In economic theory, high profits converge toward an entrepreneurial average because of the expected inter-industry flow of investments. According to Stigler’s (1963, p. 54) hyperbole, “There is no more important proposition in economic theory than that, under competition, the rate of return on investment tends toward equality in all industries.”