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Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Controlling the Essential Resource and Firm Monopoly

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  Economic theory begins with the proposition that firms compete in the market on prices. If a firm were to offer higher prices than its competitor, the buyer will shift to those competitors who are offering the lowest price. Therefore, the sales would be nil if the competitor charges higher prices than their rivals. If one firm lowers the price, all firms will follow suit, yet if one firm increases its prices, the others would not follow suit. The assumption of course is the goods are homogenous. There is no differentiation. Therefore, in this scenario of perfect competition, the firms become the price taker with the market setting the price. The firms have control over the output they produce but no control over the price. Yet the firms will seek to control the price.   In absence of control over the price, the firms might not be in a position to gain and sustain supernormal profits in the long run. This is due to the absence in barriers of entry and exit. The presence of superno
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Shape and Structure of Big Tech

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In the US, the approaching elections has resulted in the rediscovery of the curse of bigness. The last major action sought was against Microsoft in the late 1990s and early 2000. However the end result rather than the intended split was a mere rap in the knuckles for Microsoft. There were threats of action during the Obama regime but very little concrete action. In contrast, during Obama, the big technology firms gained in size and market power. Currently, a bipartisan effort is underway to tame the ‘big-tech’, with most suggestions pinpointed on the splitting of big-tech. In orthodox dialect, big tech refers to Google, Apple, Facebook, Amazon and Microsoft. It however can be expanded to other firms also. Little dispute exists over the power build-up of these firms in the last decade or so. Facebook with its acquistions of Instagram and WhatsApp has virtually become undisputed in the social media space. Similarly through multiple approaches irrespective of ethicality or otherwis
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