I present a general equilibrium theory of market formation. The structure of markets is not taken as a primitive, but rather as an outcome of the theory. A new class of decision-making agents is introduced, the marketmakers. The theory is then based on the information structure and the...

The authors examine the welfare properties of surplus maximization by embedding a perfectly discriminating monopoly in an otherwise standard Arrow-Debreu economy. Although they discover an inefficient equilibrium, the authors validate partial equilibrium intuition by showing that equilibria are...