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Power

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  • Samuel Bowles

    ()
    (Santa Fe Institute, University of Siena and University of Massachusetts)

  • Herbert Gintis

    (Santa Fe Institute and Central European University)

Abstract

We consider the exercise of power in competitive markets for goods, labour and credit. We offer a definition of power and show that if contracts are incomplete it may be exercised either in Pareto-improving ways or to the disadvantage of those without power. Contrasting conceptions of power including bargaining power, market power, and consumer sovereignty are considered. Because the exercise of power may alter prices and other aspects of exchanges, abstracting from power may miss essential aspects of an economy. The political aspect of private exchanges challenges conventional ideas about the appropriate roles of market and political competition in ensuring the efficiency and accountability of economic decisions. JEL Categories:

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2007-03.

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Date of creation: Jan 2007
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Handle: RePEc:ums:papers:2007-03

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  1. Chichilnisky, Graciela & Heal, Geoffrey, 1984. "Patterns of power: bargaining and incentives in two-person games," Journal of Public Economics, Elsevier, vol. 23(3), pages 333-349, April.
  2. Lerner, Abba P, 1972. "The Economics and Politics of Consumer Sovereignty," American Economic Review, American Economic Association, vol. 62(2), pages 258-66, May.
  3. Lloyd S. Shapley & Martin Shubik, 1964. "Ownership and the Production Function," Cowles Foundation Discussion Papers 167, Cowles Foundation for Research in Economics, Yale University.
  4. Bowles, Samuel & Gintis, Herbert, 1993. "A Political and Economic Case for the Democratic Enterprise," Economics and Philosophy, Cambridge University Press, vol. 9(01), pages 75-100, April.
  5. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
  6. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  7. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
  8. Basu, Kaushik, 1986. "One Kind of Power," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 259-82, July.
  9. Lundberg, Shelly & Pollak, Robert A, 1994. "Noncooperative Bargaining Models of Marriage," American Economic Review, American Economic Association, vol. 84(2), pages 132-37, May.
  10. Rotemberg, Julio J, 1993. "Power in Profit-Maximizing Organizations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(2), pages 165-98, Summer.
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