Exit and Power in General Equilibrium
Swiss Federal Institute of Technology Zurich, (CER-ETH); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR)
Hans H. Haller
Virginia Polytechnic Institute & State University - Department of Economics
CESifo Working Paper Series No. 2369
We integrate individual power in groups into general equilibrium models. The relationship between group formation, resource allocation, and the power of specific individuals or particular sociological groups is investigated. We introduce, via an illustrative example, three appealing concepts of power and show that there is no monotonic relationship between these concepts. Then we examine existence of competitive equilibria with free exit and study whether maximal individual power is consistent with Pareto efficiency. As applications, we discuss when power spillovers occur and we identify human relation paradoxes: positive externalities increase, but none of the household members gains in equilibrium. We further identify implicit, determinate and de facto power.
Number of Pages in PDF File: 40
Keywords: group formation, competitive markets, power, exit
JEL Classification: D41, D50, D60working papers series
Date posted: August 27, 2008 ; Last revised: October 16, 2008
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