Quasi-rent

The quasi-rent is a term from the transaction cost theory. Under a quasi-rent, the difference in the yield of an investment in its best use is understood to earnings in its next best use.

This is the loss that occurs when the investment can not be used in the intended sense. The quasi-rent occurs when specific investments must be spent for an exchange ( transaction). These are investments that have only a lower value outside the exchange. These can be siphoned off by an opportunistic contractors, for example, the fact that this is just high enough so the price that the contractor holds just on contract (cf. Hold up ). The higher is the quasi-rent, the more specific is an investment and the higher the degree of specificity of a transaction.

Example 1

The following is an example of transaction costs in relations between market participants:

Fall for the initiation of a contract over a certain power at various costs:

• It must be purchased in the procurement market for performance information on potential suppliers ( initiation costs).
• Contract negotiations take time, contracts must be made and an agreement is required ( agreement cost ).
• The agreed performance is to control ( handling costs)
• And monitor (control costs).
• Any subsequent changes are required ( adjustment costs ).

Is terminated ( due to some reason here ) the relationship between the parties, although there is still a need for the performance, so fall again to transaction costs, if the service is to be obtained from another provider.

The investment in the relationship, it was so specific, they can not (completely) be used for the construction of a new supply relationship.

Example 2

The manufacturer of special machines X develops and builds a facility for the customer Y, which has been specially adapted to his needs and desires. Customer Y but is insolvent and can no longer buy the ready-made system of X. However, Company X, the plant can sell to the competitor of Y at half price. Since it is not quite so suitable for him, he is not willing to pay full price. Thus there is a one quasi-rent for the manufacturer X.

Alternative definition

A further definition of the quasi-rent is derived from the economic definition of a pension. While the pension features an actual improvement of the outcome of the best alternative addition, the quasi-rent is a fake pension because their improvement is only fictitious.

Example: The occurring retirement of an auditor in the second term of office in a company is it used to offer in the first period, the examiner services under its potentially occurring costs during the test procedure may (Low Balling ).

Swell

• Klein, B., Crawford, RG, Alchian, AA, Vertical Integration, Appropriable Rents, and the Competitive Contracting Process, Journal of Law and Economics, Volume 21 (2 ), pp. 297-326, 1978.