Difference between revisions of "Market Power"
From Critiques Of Libertarianism
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[[Category:Economics 101]] | [[Category:Economics 101]] | ||
[[Category:Libertarian Blind Spots]] | [[Category:Libertarian Blind Spots]] | ||
| − | {{DES | des = In a market exchange, there is producer surplus and consumer surplus. Market power is when producers can raise prices above the marginal costs to capture more of the surplus. Usually through monopoly, oligopoly or other bottleneck techniques. Libertarians often deny the existence of market power.| show=}} | + | {{DES | des = In a market exchange, there is producer surplus and consumer surplus. Market power is a [[Market Failure|market failure]] that occurs when producers can raise prices above the marginal costs to capture more of the surplus. Usually through monopoly, oligopoly or other bottleneck techniques. Libertarians often deny the existence of market power.| show=}} |
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| + | There is another form of market power due to consumer oligopsony. This is a common power of employers, reducing labor costs, and a power employed by [[WalMart]] against its wholesalers. | ||
Market power lies at the points of chains of sales where oligopoly or oligopsony exist. These price makers take the vast majority of consumer surplus in the maufacturing chain, leaving the competitors at other points in the chain with essentially no surplus, at subsistance levels. The purpose of international trade proposals is not simply to create positive sum trades, but to shift those oligopoly and oligopsony points to first world nations. While there might be positive sum benefits in the international picture, tarriffs and other trade barriers might capture more of the surplus in the third world nations even when there is less overall surplus. In any event, the result is strong disparity in the distribution of the surplus. | Market power lies at the points of chains of sales where oligopoly or oligopsony exist. These price makers take the vast majority of consumer surplus in the maufacturing chain, leaving the competitors at other points in the chain with essentially no surplus, at subsistance levels. The purpose of international trade proposals is not simply to create positive sum trades, but to shift those oligopoly and oligopsony points to first world nations. While there might be positive sum benefits in the international picture, tarriffs and other trade barriers might capture more of the surplus in the third world nations even when there is less overall surplus. In any event, the result is strong disparity in the distribution of the surplus. | ||
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| + | [[Countervailing power]] in the forms of [[Unions]] and [[Anti-Trust Policy]] are the major ways of dealing with market power. | ||
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