Strategic Interaction and Markets

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1 University Press Scholarship Online You are looking at 1-10 of 77 items for: keywords : general equilibrium Strategic Interaction and Markets Jean J. Gabszewicz Published in print: 2000 Published Online: ISBN: eisbn: Item type: book DOI: / Perfect competition provides a model of a frictionless economy in which economic agents behave independently of each other, abandoning to the market the task of coordinating their individual decisions. This model is extensively studied in traditional price theory textbooks. Imperfect competition is the paradigm that develops when, on the contrary, economic agents interact in a conscious manner, which is necessarily the case when competition takes place among the few. In this system, agents act strategically, taking into account the impact of their own decisions on competitors behaviour and on the price mechanism. Such situations commonly arise when firms differentiate their products, erect strategic entry barriers, or exploit the imperfect information of their customers about the price or characteristics of their product. This book explores the theoretical richness of these economic contexts, using some basic concepts of game theory. The four assumptions underlying the paradigm of perfect competition (no barriers to entry, large number of agents, product homogeneity, and perfect information) constitute the natural departure points of the theories of imperfect competition: whenever at least one of these assumptions is violated, imperfect competition is present. The framework of the book is organized around the four corresponding themes: the role of collusion and entry barriers in the degree of market competition (Ch. 3), product differentiation (Ch. 4) and the information of agents as an instrument of competition (Ch. 5). Finally, Ch. 6 illustrates the possibility of extending the theory to a general equilibrium framework. Page 1 of 6

2 The Labour Market and the Distribution of Income: The Neo Classical Approach Tsuneo Ishikawa in Income and Wealth Published in print: 2002 Published Online: ISBN: eisbn: DOI: / X This chapter addresses the question of how the resources of labour power are supplied to alternative uses from the neoclassical viewpoint of individual rational choice, and further explains various modifications made to the framework of analysis, which are designed to cope with circumstances peculiar to the labour market that cannot be handled well in a standard framework of market clearing. Section 3.1 formulates the theory of general equilibrium for an economy with heterogeneous abilities and heterogeneous jobs, and derives some fundamental properties governing the distribution of income; in particular, it answers the supply side questions of how people's diverse abilities are allocated to different job types and how people's preferences for types of job affect such a process; and discusses implications of these on the size distribution of income. Section 3.2 discusses the possibility that each person's ability might change over time, in particular that it might be modified into a more valuable one at the expense of economic resources. Section 3.3 discusses the types of labour market equilibrium that obtain when each person's ability is imperfectly revealed more specifically, asymmetry of information exists between the workers and the employer in that every worker knows his or her ability perfectly well while the employer cannot observe it directly. Section 3.4 again discusses the implications of informational imperfection, but this time imperfection falls equally (or symmetrically) on workers and employers. Computational Methods for the Study of Dynamic Economies Ramon Marimon and Andrew Scott (eds) Published in print: 2001 Published Online: ISBN: eisbn: Item type: book DOI: / Macroeconomics increasingly uses stochastic dynamic general equilibrium models to understand theoretical and policy issues. Unless very strong assumptions are made, understanding the properties of particular models requires solving the model using a computer. This volume brings together leading contributors in the field who explain Page 2 of 6

3 in detail how to implement the computational techniques needed to solve dynamic economics models. It is based on lectures presented at the 7th Summer School of the European Economic Association on computational methods for the study of dynamic economies, held in A broad spread of techniques is covered, and their application to a wide range of subjects discussed. The book provides the basics of a tool kit that researchers and graduate students can use to solve and analyse their own theoretical models. It is oriented towards economists who already have the equivalent of a first year of graduate studies or to any advanced undergraduates or researchers with a solid mathematical background. No competence with writing computer codes is assumed. After an introduction by the editors, it is arranged in three parts: I Almost linear methods; II Nonlinear methods; and III Solving some dynamic economies. Increasing Returns and Efficiency Martine Quinzii Published in print: 1993 Published Online: October 2011 ISBN: eisbn: Item type: book Page 3 of 6 DOI: / acprof:oso/ Increasing returns to scale is an area in economics that is becoming more important in the literature. The economic phenomenon of increasing returns presents serious conceptual difficulties for the traditional competitive theory of resource allocation. While most firms exhibit constant or decreasing returns to scale, some firms manufacture products whose technology permits increasing returns to scale that are large relative to the market. These goods are an important component of economic activity in a modern economy and are typically commodities produced either by a public sector or, as in the United States, by regulated utilities. This book analyzes increasing returns using general equilibrium theory to take into account the interactions between production in the public and the private sectors, and the effects of financing the public sector on the redistribution of income. The Tendency to Equilibrium G. B. Richardson in Information and Investment: A Study in the Working of the Competitive Economy Published in print: 1997 Published Online: ISBN: eisbn: DOI: /

4 Neo classical theory associates a general equilibrium with perfectly competitive conditions but fails to demonstrate the existence of any tendency towards its realization. The assumptions of the model, by making it impossible for firms to make informed investment decisions, in fact preclude its attainment. GeneRal EQuilibrium Economics: Allowing for Imperfect Competition Jean J. Gabszewicz in Economics Beyond the Millennium Published in print: 1999 Published Online: ISBN: eisbn: DOI: / The author argues that the only possible microeconomic theory is the one based on the general equilibrium model. After a historical account of efforts to incorporate agents with market power into the general equilibrium model, he discusses the problems faced in this area and possible avenues for future research. He sees, as one of the major stumbling blocks to this endeavour, the difficulties in incorporating production and particularly increasing returns to scale into the model. General Economic Equilibrium S. N. Afriat in Logic of Choice and Economic Theory Published in print: 1987 Published Online: ISBN: eisbn: DOI: / This is the fifth of six chapters on the logic of price. It is concerned with the proper microeconomic theory of general equilibrium understood as serving questions raised by Frederic Bastiat ( ) and illuminating Adam Smith's Invisible Hand, and going beyond basic theory of prices and the market. The eight sections of the chapter are: Crusoe's development; Edgeworth's box; three senses of equilibrium (centralized equilibrium, decentralized equilibrium, exchange equilibrium); feasible prices; a Cobb Douglas world; the hyperbox; production and profit; and lessons in Edgeworth's box. Page 4 of 6

5 Markovian Equilibria in a Dynamic General Equilibrium Model with Heterogeneous Consumers Subir K. Chakrabarti in Dimensions of Economic Theory and Policy: Essays for Anjan Mukherji Published in print: 2011 Published Online: September 2012 ISBN: eisbn: DOI: / acprof:oso/ This chapter proves that there exists a sequence of equilibrium prices in a general equilibrium model in which markets meet successively over several periods. The general equilibrium model is that of a pure exchange economy, whereby each consumer receives an endowment vector of the goods available in the economy at the beginning of each period. The endowment vectors are determined in a random manner in each period as a function of the endowment of the preceding period. Such an equilibrium sequence of prices is known as a Markovian equilibrium. This chapter also analyses the existence of equilibria in which the households use such Markov decision rules to determine the amount of consumption and the purchase of capital assets in each period. Finally, it examines the efficiency and welfare properties of these equilibria. Modelling biodiversity and ecosystem services in coupled ecological economic systems William A. Brock, David Finnoff, Ann P. Kinzig, Unai Pascual, Charles Perrings, John Tschirhart, and Anastasios Xepapadeas in Biodiversity, Ecosystem Functioning, and Human Wellbeing: An Ecological and Economic Perspective Published in print: 2009 Published Online: September 2009 ISBN: eisbn: DOI: / acprof:oso/ This chapter considers how economists model biodiversity in coupled social ecological systems, taking two polar cases along with a more general problem. Economists assume that all human decisions are purposive: people are assumed to optimize some objective function subject to some set of initial conditions, to some set of resource constraints, and to the dynamics of the system being used. The chapter considers two polar cases and one intermediate case. One polar case involves the preservation of wilderness areas or protected parks in 'close to natural' states. A second involves the exploitation of ecosystems Page 5 of 6

6 to produce foods, fuels and fibers. The intermediate case involves the management of ecosystems to achieve a balance between nonconsumptive cultural services with consumptive provisioning services. While the constrained optimization technique applied in all three cases may be unfamiliar, the chapter tries to give the intuition behind it. It also provides a verbal description of each of the three model structures developed. In all cases the social and biogeophysical components of the coupled system are interdependent connected through a series of feedback loops. Economists refer to such systems as 'general equilibrium systems'. That is, the dynamics of the system in some state are driven by a tendency towards the equilibrium corresponding to that state, and any perturbation has the potential to stimulate responses across the system. Bimetallism in Theory Marc Flandreau in The Glitter of Gold: France Bimetallism and the Emergence of the International Gold Standard Published in print: 2004 Published Online: August 2004 ISBN: eisbn: DOI: / Chapter 1 describes the international monetary landscape between 1848 and The prominent role of bullion is emphasized. It also reviews existing theories of the operation of a bimetallic system. The main point is that a bimetallic system rests on bimetallic arbitrage: agents will buy the depreciating metal and sell the appreciating one, herby stabilizing their relative value. This suggest that it is key to study the actual operation of bimetallic arbitrage. Page 6 of 6

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