A General Equilibrium Model of the Three-Sector Competitive Economy
AbstractThe presence of externality, indivisibility, and uncertainty destroys the market's ability to coordinate production. Entrepreneurs rise to organize production by assuming a part of the allocative role traditionally reserved exclusively to the market. Assume that there are three classes of entrepreneurs: profit- oriented, nonprofit oriented and public entrepreneurs. These entrepreneurs cooperate with their own type to organize, respectively, the for-profit and nonprofit firms, as well as local communities. They do so by playing a society-wide cooperative game. At the conclusion of this game, not only firms and communities come into existence, production and exchange also take place at competitive equilibrium prices. This equilibrium is pareto optimal.
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Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 9603002.
Length: 42 pages
Date of creation: 05 Mar 1996
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Find related papers by JEL classification:
- D1 - Microeconomics - - Household Behavior
- D2 - Microeconomics - - Production and Organizations
- D3 - Microeconomics - - Distribution
- D4 - Microeconomics - - Market Structure and Pricing
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"Production, Information Costs and Economic Organizations,"
UCLA Economics Working Papers
10A, UCLA Department of Economics.
- Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
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