The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd


  • Samuel Bowles
  • Herbert Gintis
Reference work entry


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.


Bargaining power Coase, R.H. Consumer sovereignty Firm, theory of Incomplete contracts Labour market contracts Labour market search Market power Monopolistic competition Nash equilibrium Pareto efficiency Power Principal and agent Purchasing power Rent Reservation wage Sanctions Short-side power Technical efficiency 

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We are grateful to Maria Olivella Rizza, Ceren Soylu, Elisabeth Wood and Peyton Young for comments, and to the Behavioral Sciences Program of the Santa Fe Institute, the University of Siena and the MacArthur Foundation for financial support.


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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Samuel Bowles
    • 1
  • Herbert Gintis
    • 1
  1. 1.