What is quasi rent?

The Quasi Rent meaning is that it refers to a temporary economic rent that resembles returns to a supplier or owner.

It is an additional income earned by a factor of production (such as machinery, specialised assets, or skilled labour) in the short term. Unlike pure economic rent, which arises from fixed supply factors (like land), quasi-rent is a temporary phenomenon.

• Barriers to Entry: Quasi-rent can arise due to barriers preventing potential competitors from entering the market. For example, patents or legal protections for intellectual property create quasi-rents.

• Market Fluctuations: Entrepreneurial responses to market fluctuations can lead to quasi-rent.

• Capital Constraints: When there’s a lack of real capital to meet near-term increases in demand, quasi-rent may emerge.

While quasi-rent exists temporarily, the opportunity to profit encourages investment in new capital. Over time, competition will reduce quasi-rent as more capital enters the market.

: 

Oliver Williamson highlights that the combination of opportunism with transaction-specific investments (referred to as “appropriable quasi rents”) plays a role in decisions related to vertical integration.

To know the difference between rent and quasi rent, you can read the answer mentioned by Jayati above.

Read more -

Hello. I am an Economics professor by profession. I saw your answer and thought of helping you with an elaborate explanation regarding the quasi rent definition. So, here is all the information you need. Kindly keep reading.

What do you mean by quasi rent

Let me try to present the meaning of quasi-rent from different angles. I believe that this will give you a clear picture of the topic. So, here it goes.

The concept was presented by Dr. Alfred Marshall, who stated this statement about quasi-rent, “It is not possible for human beings to increase the supply of land. It is fixed by nature. If the price of production rises, the surface of the earth cannot be increased and if the price falls, it cannot be decreased. But by the appliance of the machine, which is the product of human efforts, the supply can be increased or decreased if a fairly long period of time is allowed.”

I’ll try to simplify this statement via an example. Suppose there is a huge demand for houses. However, the supply is limited as the building material is limited. This will lead to a sudden increase in the profit gained from selling houses. This sudden increase in profit is termed as quasi-rent. So, you can understand quasi-ret as the surplus or extra that is temporary.

If you wish to know the difference between rent and quasi-rent, you should view Jayati’s answer.

I hope my answer helps you understand the quasi rent meaning.

It is defined as surplus earnings generated by the factors of production, except land. The earnings from instruments and machines are referred to as quasi rent. It is just the income generated when the demand for products suddenly increases. This concept was introduced by Alfred Marshall and that’s why it is also known as Marshallian rent.

Let’s say there’s a sudden increase in the demand for properties, but the supply of properties doesn’t increase with that speed due to the limited building material

: Merchant shipping became scarce during the last war. New ships couldn’t replace the lost ships quickly as ships take a lot of time to build. As a result, the existing vessels started charging high freights and earned huge profits. These profits were temporary, because had the requirement lasted long enough, new ships would’ve been built and profits reduced to normal. Such abnormal gains are referred to as ‘quasi-rent’ by Marshall.

This is how I can define quasi rent in simple words.

It can also be expressed in terms of revenue:

In the long run, every cost is considered a variable cost. In long run, the equilibrium can be achieved when total revenue and the total costs are the same. In such cases, there is no quasi rent

The quasi-rent arises from the man-made capital equipment whereas rent arises from land and other free gifts of nature.

The quasi-rent arises only in a short period whereas rent arises both in the short and long period.

Quasi rent is temporary whereas rent is permanent.

 Read more:

I hope now you know what is quasi rent and how it is different from rent. Please like my answer if you find it helpful

😊