Legally Charged: Embeddedness and Profit in Large Law Firm Legal Billings

Retailer-reseller embeddedness and price-setting in the informal economy

“…Findings from the study suggest that retailers who do not have embedded ties with resellers within the informal economy could use their power to impose prices on the resellers. This is contrary to the view in the literature that embedded ties make producers dependent on consumers who unilaterally use their bargaining power to influence prices (Uzzi and Lancaster, 2004;Lancaster and Uzzi, 2012). A plausible explanation for these findings is that retailers that deliberately choose not to transact with resellers who have embedded ties may have no other option but to impose their power on resellers.…”

“…The relational embeddedness perspective emphasizes that the social relations and network of affiliations between economic actors influence price-setting (Granovetter, 1985). Embedded ties affect prices by offering unique value to exchange based on the creation of non-market information and informal governance mechanisms that lower transaction costs in ways that public markets do not (Uzzi and Lancaster, 2004;Lancaster and Uzzi, 2012). This sociological perspective is important, but it is only limited to understanding the social dynamics of price-setting in markets where producers sell directly to consumers (Uzzi and Lancaster, 2004).…”

“…A novel contribution of this study is that it advances the work on the link between relational embeddedness and price-setting within firms (Granovetter, 1985;Uzzi and Lancaster, 2004;Lancaster and Uzzi, 2012). The study goes beyond investigating the social dynamics of price-setting among producers and consumers (Uzzi and Lancaster, 2004) by focusing on the interactional dynamics between retailers and resellers.…”

Inefficiencies in Networked Markets

“…One limitation of the current approach is the unit demand and unit supply assumption. There are several examples of networked markets where this assumption does not fit well: traders of agricultural produce in Madagascar trade via multiple relationships (Fafchamps and Minten 1999); corporate lawyers are instructed by multiple businesses (Lancaster and Uzzi 2012); suppliers trade with more than one manufacturer (Uzzi 1997); and restaurateurs buy from more than one vendor at fish markets (Kirman and Vriend 2000). Recent theoretical work has shown that with multi-unit demands and supplies, the set of competitive equilibria 58 has the same lattice structure as with unit demand and supply (Milgrom 2009;Jaume, MassÓ, and Neme 2012).…”