The von Neumann-Morgenstern theory of games does not yield determinate solutions (corresponding to unique payoff vectors) for two-person variable-sum games and for n-person games. The present paper outlines a general theory of rational behavior in game situations which does yield determinate solutions for all classes of games. The theory is based on two classes of rationality postulates: those defining rational behavior as'such, and those defining rational expectations concerning the other players' behavior. It is argued that this new approach greatly increases the possibilities for the application of game theory in economics and the other social sciences.

or vice versa will inevitably yield incomplete if not erroneous results. SUMMARY THE PRESENT investigation is a part of a study of the stock market which is motivated by three basic considerations: (1) Existing demand theory is inadequate for analyzing the problem of speculative prices and thus incapable of providing a valid prediction theory for this type of price mechanism. (2) The volume of sales in a commodity market has an economic significance in its own right and thus deserves much more attention by economists than it has received so far. (3) Prices and volumes of sales in the stock market arejoint products of a single market mechanism, and any model that attempts to isolate prices from volumes or vice versa will inevitably yield incomplete if not erroneous results. While the theoretical model and its implications will be presented elsewhere, the empirical results reported here serve as a basis for the proposed theory. Among the significant results so far found are: (1) A small volume is usually accompanied by a fall in price. (2) A large volume is usually accompanied by a rise in price. (3) A large increase in volume is usually accompanied by either a large rise in price or a large fall in price. (4) A large volume is usually followed by a rise in price. (5) If the volume has been decreasing consecutively for a period of five trading days, then there will be a tendency for the price to fall over the next four trading days.

In recent years, a number of power spectra have been estimated from economic data and the majority have been found to be of a similar shape. A number of implications of this shape are discussed, particular attention being paid to the reality of business cycles, stability and control problems, and model building.