10 - Market Organization

Abstract

This chapter discusses the degree of monopoly power and two-person bargaining games. A market situation is one of cooperation between buyer and seller and conflict between seller and seller or buyer and buyer. It should be considered from the viewpoints of both cooperative and noncooperative games. The noncooperative theory was developed to theory of oligopoly. The chapter presents Nash's cooperative game theory and discusses the income distributional aspects of both cooperative and noncooperative market organization. The chapter further focuses on the implication of Cournot's theory for the factor demands of an industry and commodity supply as a function of other prices. It is found that if market power is assumed to be one-directional, Cournot's theory applies. An example of a pure bargaining game is that of trading between two individuals when one individual can offer only positive quantities of goods to the other. The equilibrium point is simply the no-trade alternative because except for isolation, given that each trader has made a positive offer to the other on the presumption that the others offer was fixed, each would do better by withdrawing his own offer.