To Trade or Not to Trade : Economies with a Variable Number of Tradeables

We present a general equilibrium model that encompasses the endogenous selection and shadow-pricing of a set of tradeable commodities, with home-based and social production activities. In the model, a market system is a set of costly social institutions which embody the trade and production technologies available in the economy. Our equilibrium concept describes the pricing of market institutions, thus pricing the tradeability of a commodity. We obtain the existence and the decentralization of Pareto-efficient allocations. We discuss an example regarding the transition of a guild-based economy into a market-based economy