This book is an analysis of two major resource allocation mechanisms which function in the modern economy. One is the market mechanism, which has been subject to extensive examination by neoclassical economists; the other is a mechanism instituted by a firm, which has been given relatively little attention. Professor Ichiishi presents a ground-breaking theory of the firm which views the firm as an organization characterized first by diversity of (and most likely, conflict among) the interests of its members, and second by the members' acceptance of a coordinated choice of activities. The author constructs a formal framework which embodies both the neoclassical market mechanism and the descriptive cooperative game, and obtains the following basic results: the definition of a new descriptive equilibrium concept that can be interpreted as an outcome of simultaneous workings of the two resource allocation mechanisms; existence results for this concept which synthesize the existence theorems of the neoclassical paradigm and of the core theory; Pareto non-optimality of the equilibrium; and a welfare comparison of the present-day capitalism and market-cooperative socialism. He then develops a normative mechanism theory to implement Pareto optimality in the presence of increasing returns to scale. The book ends with a partial equilibrium analysis which characterizes the coalitionally stable hierarchical structure in a firm. Professor Ichiishi's analysis should be a major contribution to the theory of the firm, cooperative game theory, general equilibrium analysis, and fixed-point theory.
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