A new approach to market behavior is suggested. This approach has a coherent game theoretic foundaton, addresses such anomalous economic behaviors as strikes, rigid wages and unemployment, regulation of financial markets, de-presssion, and nonmarket allocation, and, more generally, provides insights for Finance, Oligopoly Theory, Industrial Organization, and Macroeconomics. The central theme of the approach is that exchange technologies are a basic building block in a model, as are tastes, endowments, and production technologies. Moreover, the key feature of an institution of exchange is that it allows the making of a binding final offer.
- Federal Reserve Bank of Minneapolis. Research Division.
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