This week's Theory Semianar features Professor Steven Callendar of Stanford University. Callendar is a Professor of Political Economy at Stanford Graduate School of Business. In this seminar he will be discussing his paper "Market Competition and Political Influence" (with Dana Foarta and Takuo Sugaya) (PDF link).

 

Steve Callander’s research interests lie at the intersection of business, politics, and society. As a researcher, he uses the tools of game theory to build models of political and economic institutions (legislatures, bureaucracies, markets, etc.) to understand how they work, how they can be designed better, and how business strategy can incorporate “beyond market” issues. At the GSB, Professor Callander teaches classes on Strategy Beyond Markets and Strategic Crisis Management in both the MBA program and a variety of Executive Education programs.

 

Zoom link available here.

 

Abstract:

The operation of markets and of politics are in practice deeply intertwined. Political decisions set the rules of the game for market competition and, conversely, market competitors participate in and influence political decisions. We develop an integrated model to capture the circularity between the two domains. We show that a positive feedback loop emerges such that market power begets political power in a positive feedback loop, but that this feedback loop is bounded. With too much market power, the balance between politics and markets itself becomes lopsided and this drives a wedge between the interests of a policymaker and the dominant firm. Although such a wedge would seem pro-competitive, we show how it can exacerbate the static and dynamic inefficiency of market outcomes. More generally, our model demonstrates that intuitions about market competition can be upended when competition is intermediated by a strategic policymaker. Keywords: market and political power, political