[Avodah] Onaah and economic models

Arie Folger rav.arie at rabbifolger.net
Mon Jun 10 05:09:14 PDT 2024

Dear Ovedim,

The premise behind coming onaah is that good are commodities asked they
have an approximate market price. This is definitely true for some good,
but it's it the rule out the exception?

When ploughing through the analyses of the Pitchei Choshen on hilchot
onaah,v it was relatable how well aware the author of the economic reality,
and how Halacha would be different for good for which there is no
commodified marketplace and price. He recognized that even there venues in
which a good is offered for sale would legitimately impact the price.
Translation: the price of a coffee at a cafe is commodified for that kind
of cage, but doesn't obligate the Hilton to charge the same mid level

Now I came across and article that talks about the same phenomenon from the
perspective of microeconomic theory, namely how common is an efficient
market. The conclusion that that though out does definitely exist, it may
not be the norm. This has two kinds of consequences for onaah. Ok there one
hand, there are more markets where we cannot apply on onaah because they
are insufficiently commodified. On the other hand, onaah arguably suddenly
becomes very applicable to market players at the margins of somewhat
efficient markets, i.e. where there is some kind of going rate, but with
many players trying to abide market power and other kind of powers to
collect higher prices.



Excerpt: »For example, in the CORE textbook, firms are introduced as having
the power to set prices. That might sound obvious but it’s not how things
work in the typical introductory model of a perfectly competitive market.
In that model, there are lots of identical sellers and the market sets a
price. Firms can choose to either sell at that market price or not sell at
all. Imagine a street with several very similar pizza parlours: if one
tries to charge a much higher price than the others, customers will notice
and stop shopping there, and that parlour will have to lower its price.

At least that’s the old Econ 101 logic. CORE puts that at the back of its
approach to signify that it’s the special case rather than the norm, says
Bowles. Instead, the CORE pedagogy teaches a model where firms sell
different goods, and each has at least some power to dictate prices and
wages. This choice has implications for more than prices. By eschewing the
perfect competition model, CORE introduces the idea that power is a central
aspect of market interactions.«
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