Journal of Economic Perspectives: Vol. 4 No. 1 (Winter 1990)


Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter


JEP - All Issues

The Benefits of Asymmetric Markets

Article Citation

Scitovsky, Tibor. 1990. "The Benefits of Asymmetric Markets." Journal of Economic Perspectives, 4(1): 135-148.

DOI: 10.1257/jep.4.1.135


Economists are often so mesmerized by the magic of perfect competition that they neglect or fail to notice other, equally important achievements of the real market economy around us, most of which seem to result from monopoly tempered by competition and competition tempered by monopoly. Here, we drop the one assumption underlying general equilibrium theory that does perhaps the most violence to reality: that all economic agents possess all the market information relevant to the transactions they enter or contemplate entering into. Knowledge is power, and those on the better informed side of the market can exploit the people on its other side. Such power is the main source of monopoly power, its exploitation yields monopoly profit, and rivalry among market participants who wield such power is the main form of monopolistic competition. The root cause of the unequal distribution of knowledge between buyers and sellers is the division of labor, which causes everybody to know more than others about their own specialty and less about other people's specialties than others know about them. The farther the division of labor proceeds, the wider becomes the gulf between the specialist's knowledge and the nonspecialist's ignorance of each specialty. Such disparity in the knowledge and preparedness of buyers and sellers to deal with each other and to stand up to each other is an important and unavoidable feature of today's market economy, which has received surprisingly little attention.

Article Full-Text Access

Full-text Article (Complimentary)


Scitovsky, Tibor (Stanford U)

JEL Classifications

022: Microeconomic Theory--General


View Comments on This Article (0) | Login to post a comment

Journal of Economic Perspectives

Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)


JEP - All Issues

Virtual Field Journals

AEA Member Login:

AEAweb | AEA Journals | Contact Us