Rationality, Information Power and Institutional Theory

Alessandro Morselli

Abstract


The objective of this paper is to show the importance of the role played by ‘power’ in economic analysis and how this, through information asymmetry, leads to the exercise of economic power of one unit over other units. This power derives from inequality in the amount of information possessed. The problem then arises of identifying tools to reduce the asymmetric information that generates the ‘domination’ effect of one individual over another. Institutional arrangements have been identified as alternative tools to the price mechanism, in order to favour individual decisions in a scenario marked by power, information and cognitive bounds. Thus, it will be highlighted how institutions favour symmetry in the conflicting relations of economic powers, in order to counteract the formation of unbalanced relations.             


Keywords


Information asymmetry, domination, uncertainty, institutions, power, rationality

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