A MIXED NASH-WALRASIAN EQUILIBRIUM MODEL WITH ENDOGENOUS STEALING AND ENDOGENOUS SPECIALIZATION

Using a price vector and a conjecture about a population's activities, this paper suggests that a mixed Nash-Walrasian equilibrium (NWE) occurs if, when every individual maximizes her utility under her conjecture, the trading markets and the theft 'markets' are all cleared. Thus, in our model the property rights system, instead of giving protection directly to producers, is aimed mainly at discouraging illegal behaviour. As a result, the equilibrium of the economy is seen to depend not only on self-protection and/or the legal system itself, but also on the transportation efficiency of the economy. Copyright 2004 Blackwell Publishing Asia Pty Ltd