Producer and Consumer Sovereignty

Readers Question: Does market domination means sovereignty?  For example if a market is dominated by producers then does it show that there is a producer sovereignty?

Definition Consumer sovereignty. – the ability and freedom of consumers to choose from a range of different goods and services. It means that ultimately it is consumers who will decide what is produced and how scarce resources are allocated.

Consumer sovereignty is an important concept for classical economics. This assumes that consumers have the freedom and ability to choose between different suppliers and firms. In theory, consumers will use their discretion to choose the cheapest and / or best quality goods. In theory this consumer sovereignty ensures the effective functioning of free markets. It rewards efficient firms and encourages firms to provide goods consumers want.

Thus consumer sovereignty forms an important aspect of free market economics, it is a function developed by the economist Ludwig Van Mises.

Definition Producer Sovereignty. – When firms have the power and ability to influence consumer decisions. For example, in a monopoly consumers have no choice and have to pay the price and buy the goods offered by firms. Producer sovereignty means that it is firms who will decide what to do. For example, some argue persuasive advertising techniques mean consumers will buy what firms wish to sell.

In reality, there is a mixture of both consumer and producer sovereignty. But, if markets are more competitive, consumer sovereignty plays a more important role.