Concepts and Theories of Pure Competition

by Lloyd S. Shapley, Martin Shubik

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An examination of a classical formulation of the marketplace from three different theoretical viewpoints. The first model supposes all individuals to be price-takers, acting in isolation to maximize their private utility; the result is the "competitive equilibrium," or Walras solution. The second model is a fully cooperative game, with no restrictions on communication, negotiation, or collusion; the result is the "core," or Edgeworth solution. The third is an asymmetric, noncooperative game, in which half the players (e.g., the consumers) are passive price-takers, while the others have strategic freedom to exploit this passivity, individually but not collusively. The "equilibrium point" of this game corresponds to the oligopolistic solution of Cournot.

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