13. Monopoly Power

Up to now, the dimension of power has been missing from our analysis. We have imagined an economic world in which individuals and organizations compete for their advantage, but their choices have all been about themselves—how to produce more efficiently, what to purchase, and so on. Now we take the next step and consider situations in which competitors act strategically to dominate or exploit others. We will do this using two models, one portraying the power to control prices in order to gain higher profits, the other the power that results from having a superior bargaining position. The first will be taken up in this chapter, and bargaining will be examined in Chap. 14. Taken together, they provide the beginning of an explanation of how a system based on free choice in the marketplace can result in concentrations of wealth and power.