ABSTRACT
In the Walrasian general equilibrium model, firms and households make decisions based on commodity and factor prices, markets generate prices that equate supply-anddemand, and ownership rules assign the return to factor inputs to individuals. The general equilibrium model and the Fundamental Theorem are often considered justifications for a private-ownership market economy. Walrasian general equilibrium theory explains cooperation on the basis of costless third-party contract enforcement, whereas classical game theory explains cooperation on the basis of repeated interactions and reputation effects. The real benefits of competition have only come to light with the development of game theoretic models of competitive interactions based on endogenous contract enforcement. A contingent renewal market is a market in which exchanges between buyers and sellers are regulated by contingent renewal relationships. The consumer pays a price greater than marginal cost using the threat of brandswitching to induce a high level of quality on the part of the firm.
