To Trade Or Not To Trade: Economies With A Variable Number Of Tradeables

Robert P. Gilles and Dimitrios Diamantaras

International Economic Review, 2003, vol. 44, issue 3, 1173-1204

Abstract: We present a general equilibrium model that encompasses the endogenous selection and shadow-pricing of a set of tradeable commodities, with home-based and social production activities. In the model, a "market system" is a set of costly social institutions which embody the trade and production technologies available in the economy. Our equilibrium concept describes the pricing of market institutions, thus pricing the "tradeability" of a commodity. We obtain the existence and the decentralization of Pareto-efficient allocations. We discuss an example regarding the transition of a guild-based economy into a market-based economy. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2003
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