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A General Equilibrium Model of the Three-Sector Competitive Economy

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  • S.Y. Wu

    (Economics)

Abstract

The 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.

Suggested Citation

  • S.Y. Wu, 1996. "A General Equilibrium Model of the Three-Sector Competitive Economy," Microeconomics 9603002, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:9603002
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    References listed on IDEAS

    as
    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. David Easley & Maureen O'Hara, 1983. "The Economic Role of the Nonprofit Firm," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 531-538, Autumn.
    3. Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, vol. 38(1), pages 101-117, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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