The Competitive Price Mechanism

  • Robert P. GillesEmail author


Traditionally, economic theory investigates production, consumption and trade under market institutions founded on the Law of One Price: All commodities are traded at a unique global market price. In this chapter we show that in an economy with consumer-producers the Law of One Price implies the dichotomy between production and consumption decisions. Moreover, the Law of One Price is viable in the sense that a general market equilibrium emerges. Assuming IRSpec in productive abilities, there endogenously emerges a social division of labour that is guided by these market prices. Finally, these equilibria are socially optimal and all socially optimal social divisions of labour can be supported as general equilibria under the Law of One Price.


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Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Management SchoolQueen’s University BelfastBelfastUK

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