When More Power Makes Actors Worse Off: Turning a Profit in the American Economy

We propose a theory which predicts that an increase in an actor's relative power reduces the actor's rewards in high mutual dependence dyads. Our argument is based on the premise that higher relative power gives the more powerful actor a greater share of surplus, but it also reduces dyadic exchange frequency, which lowers the expected magnitude of that surplus. As mutual dependence increases, fairness issues associated with power imbalances reduce exchange frequency and expected surplus at an increasingly higher rate. Thus, at a certain level of mutual dependence, the more powerful actor obtains a greater share of a much smaller exchange surplus leading him or her to be worse off than he would be in an equal-power dyad. We support this prediction with data on profit rates in American industries from 1977 through 1992.