Countervailing power: Difference between revisions
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Modern economies give massive powers to large business corporations to bias this process, and there arise 'countervailing' powers in the form of trade unions, citizens' organizations and so on, to offset business's excessive advantage. |
Modern economies give massive powers to large business corporations to bias this process, and there arise 'countervailing' powers in the form of trade unions, citizens' organizations and so on, to offset business's excessive advantage. |
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A example of countervailing power would be the negotiations between Sony and Wal-Mart. Since both have very large market shares, Sony can't charge whatever price it wishes to Wal-Mart. If Wal-Mart doesn't buy at the Sony dictated price, Sony will suffer due to a loss in revenue. This wouldn't be the case between Sony and a mom and pop store in a local town. Sony can charge the mom and pop store as large a price as it wishes, and the local store has to abide by it if it wishes to sell any Sony products. |
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[[Category:Industrial organization]] |
[[Category:Industrial organization]] |
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Revision as of 22:59, 30 October 2008
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| This article relies largely or entirely on a single source. (July 2008) |
Countervailing power is the theory of political modification of markets, formulated by American economist John Kenneth Galbraith.
In the classic liberal economy, goods and services are provided and prices set by free bargaining.
Modern economies give massive powers to large business corporations to bias this process, and there arise 'countervailing' powers in the form of trade unions, citizens' organizations and so on, to offset business's excessive advantage.
A example of countervailing power would be the negotiations between Sony and Wal-Mart. Since both have very large market shares, Sony can't charge whatever price it wishes to Wal-Mart. If Wal-Mart doesn't buy at the Sony dictated price, Sony will suffer due to a loss in revenue. This wouldn't be the case between Sony and a mom and pop store in a local town. Sony can charge the mom and pop store as large a price as it wishes, and the local store has to abide by it if it wishes to sell any Sony products.
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