Reformulating marginal productivity theory by replacing productivity with respect to commodities with productivity with respect to persons and then defining perfectly competitive equilibrium as an allocation at which each person receives the marginal product of his/her contribution called a no-surplus allocation there emerges a competitive theory of price determination. Characterizations of no-surplus allocations are given in models with a nonatomic continuum of agents and an infinite-dimensional commodity space. Comparisons between the no-surplus and Walrasian equilibrium definitions of competitive equilibrium are made and some sufficient conditions are obtained for the existence of a no-surplus allocation.

From the perspective of the Walrasian general equilibrium model, entrepreneurial and opportunistic behavior seems foreign. Can the model be refashioned so that it can accommodate such behavior? Many would say no, but we argue the contrary. Indeed, we present a reformulation of the model that serves as a gateway to, rather than a detour from, such contemporary issues as innovation and incentives. The trick is to reexamine what perfect competition means. Starting with an historical summary of general equilibrium, we sketch an image of the perfect competitor as an active market opportunist, seeking out profit potentials wherever he can.

The preserving of flexibility when faced with uncertainty is a neglected aspect of behaviour under risk. Yet it is an important factor in decisions to hold liquid assets or delay irreversible investment. This paper formalizes the notion of flexibility in a sequential decision context, and relates its value to the amount of information an agent expects to receive. A rudimentary money demand model is developed embodying these ideas, and the history of flexibility as an economic concept is traced.

The first theorem of welfare economics rests on the assumption that individuals have neither price-making nor market-making capacities. The authors offer a revision in which individuals have such capacities. The revision emphasizes two keys for market efficiency: the need to align private rewards with social contributions--called full appropriation--and the need for an assumption to counter the possibility of coordination failures in the choice of produced commodities--called noncomplementarity. The authors also emphasize that information about prices of unmarketed commodities involves decentralized knowledge available only to product innovators and that pecuniary externalities are important potential sources of market failure.

The First Theorem of Welfare Economics rests on the assumption that individuals have neither price-making nor market-making capacities. We offer a revision in which individuals have such capacities. The revision emphasizes two keys for market efficiency: (i) the need to align private rewards with social contributions--called full appropriation, and (ii) the need for an assumption to counter the possibility of coordination failures in the choice of produced commodities--called noncomplementarily. We also emphasize that information about prices of unmarketed commodities involves decentralized knowledge available only to product innovators and that pecuniary externalities are important potential sources of market failure.

A pairwise trading process is formulated subject to conditions of nonnegativity of traders' holdings and quid pro quo. It is shown that that: (i) There is a centralized procedure that achieves the equilibrium allocation for an arbitrary economy. (ii) It is not in general possible to find a decentralized procedure that achieves the equilibrium allocation for an arbitrary economy. (iii) In a monetary economy there is a decentralized procedure that achieves the equilibrium allocation. The usefulness of money is that it allows decentralization of the trading process.

The distinction between nonatomicity and thick markets as the source of perfect competition is examined. The authors construct a model of an imperfectly competitive economy with a nonatomic continuum of traders and a continuum of differentiated commodities for which Walrasian equilibria exist. The failure of perfect competition is identified in two ways: individuals can affect prices and the core is strictly larger than the set of Walrasian allocations. By contrast, it is shown that, when markets are physically or economically thick (or both), then individuals cannot typically affect prices and the core always coincides with the set of Walrasian allocations.