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Pure competition, the coalition force and the equitable sharing

Lloyd Shapley and Martin Shubik

Economic Policy, 2013, 146—174

Abstract: This article is related to the conceptual framework of the theory of economic competition, as well as with the corresponding effect of the new solution concept, borrowed from the mathematical theory of games. We consider three basic principle of distribution in economic society - pure competition, the coalition forces and the equitable distribution of - and demonstrate how they allow to form three different approaches to the "decision" of the mathematical model of the market. Two such solutions, competitive balance and core, is closely related, despite the sharp differences in the interpretation of the heuristic. Our goal is to introduce in the economic analysis of the decisions of the third - the value of the game, as well as comparing and contrasting it with the other two. As is the case with core decision based on the value of the game it assumes that the market is based on the league game in which a plurality of persons participate. The solution based on the value, however, is looking for a unique, fair compromise between all the competing interests, while the core delimits a "neutral territory" between uncompromising coalitions. Competitive balance, in turn, does not recognize any general conspiracy. But when the number of participants is large, it is, nevertheless, can be demonstrated under rather general conditions in which all three types of solutions come to an agreement, predicting the same result, but due to various reasons.

Keywords: competitive equilibrium; the core value of the game (search for similar items in EconPapers)
Date: 2013
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