Book contents
- Frontmatter
- Contents
- List of tables
- Preface
- Chapter 1 Prologue
- Chapter 2 Perceptions and reality: the genesis of the Sherman act
- Chapter 3 Competition, cooperation, and efficiency
- Chapter 4 Stable coalitions
- Chapter 5 Equilibrium with decreasing average cost: an application of the theory of the core illustrated by production and exchange among spatially separated markets
- Chapter 6 A theory of self-enforcing agreements
- Chapter 7 Some new results on duopoly applied to theories of Cournot, Bertrand, and Edgeworth
- Chapter 8 Rivalry by means of innovation
- References
- Index
Chapter 5 - Equilibrium with decreasing average cost: an application of the theory of the core illustrated by production and exchange among spatially separated markets
Published online by Cambridge University Press: 03 November 2009
- Frontmatter
- Contents
- List of tables
- Preface
- Chapter 1 Prologue
- Chapter 2 Perceptions and reality: the genesis of the Sherman act
- Chapter 3 Competition, cooperation, and efficiency
- Chapter 4 Stable coalitions
- Chapter 5 Equilibrium with decreasing average cost: an application of the theory of the core illustrated by production and exchange among spatially separated markets
- Chapter 6 A theory of self-enforcing agreements
- Chapter 7 Some new results on duopoly applied to theories of Cournot, Bertrand, and Edgeworth
- Chapter 8 Rivalry by means of innovation
- References
- Index
Summary
Introduction
Edgeworth invented the method of analysis now known as the theory of the core in his study of exchange. This reminds us that neoclassical economic theory is the source of this approach and that the theory of the core owes its greatest achievements to refinements of the study of exchange. A coalition of traders in the current usage corresponds to a contract among them in Edgeworth's analysis. The process by which traders seek the best possible terms for themselves is called recontracting by Edgeworth. An allocation of the goods among the traders gives an equilibrium when none can get better terms. Not only does this mean that each leaves the market with a bundle of goods he does not regard as inferior to his initial one but also that he cannot obtain better terms from anyone. The theory attempts to answer the question of when there is an equilibrium and if there is one whether it is the only one. It is a major accomplishment of Edgeworth to answer these questions. Nor is this all. He found the range of possible equilibria in case there is only a finite number of traders and showed how the indeterminacy shrinks as the number of traders of each type increases. In the limit with an infinite number of traders of each type, only a single equilibrium might be compatible with the competitive process.
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- A Theory of Efficient Cooperation and Competition , pp. 144 - 186Publisher: Cambridge University PressPrint publication year: 1987