Sem 1 - Fligstein 1996

Question 1

What is the first basic insight?

Answer 1

The social structures of markets and the internal organization of firms are best viewed as attempts to mitigate the effects of competition with other firms

Question 2

What 2 dimensions do “markets as politics” have?

Answer 2

1. Formation of markets as part of state-building. Cover rules of market-building and market intervention and are keys to understand how new markets develop in a society.
2. The internal firm power struggle - who will control the organization and how will it be organized?

Question 3

What 4 things (institutions) define the social institutions necessary to make markets?

Answer 3

1. Property rights
2. Governance structures
3. Conceptions of control
4. Rules of exchange

Question 4

How does Fligstein define markets?

Answer 4

Markets refer to situations in which some good or service is sold to customers for a price that is paid in money.

Question 5

What are institutions?

Answer 5

They refer to shared rules, which can be laws or collective understandings, held in place by custom, explicit agreement, or tacit agreement.

These institutions what can be called
- property rights 
- governance structures
- conceptions of control
- rules of exchange
enable actors in markets to organize themselves, to compete and cooperate and to exchange.

Question 6

What are property rights?

Answer 6

Property rights are social relations that define who has claims on the profits of firms

Question 7

Explain governance structures!

Answer 7

Governance structures refer to the general rules in a society that define relations of competition, cooperation, and market-specific definitions of how firms should be organized.

These take 2 forms:

1. laws
2. informal institutional practices

Question 8

Explain the purpose of action in a given market!

Answer 8

To create and maintain stable worlds within and across firms that allow firms to survive.

Question 9

Explain conceptions of control!

Answer 9

Conceptions of control refer to understandings that structure perceptions of how a market works and that allow actors to interpret their world and act to control situations. Conceptions of control reflect tactics for competition or cooperation and the hierarchy or status ordering of firms in a given market. The state must not oppose a conception of control

Question 10

Explain rules of exchange!

Answer 10

Rules of exchange define who can transact with whom and the conditions under which transactions are carried out. Rules must be established regarding shipping, billing, insurance, the exchange of money, and the enforcement of contracts.

Question 11

What are the two sources of instability in markets?

Answer 11

1. The tendency of firms to undercut one another’s prices

2. The problem of keeping the firm together as a political coalition

Question 12

Strategies to control price!

Answer 12

Cooperate with competitors to share markets.

Cartels, price controls, creating barriers to entry, limiting production, patents and so on.

Question 13

Internally to control competition

Answer 13

1. Integration
   * vertical - merger of suppliers or customers - control over inputs and outputs
   * horizontal - (merger with competitors) few firms, tacitly agreeing not to war on price
2. Diversification
   * entering new markets to increase the probability of firm survival
   * differentiation basis of quality or price - products differ, price
   * diversify a financial perspective or line of goods (a marketing perspective)