Economic theory has traditionally and pedagogically viewed the market as a system of exchange in goods and services. Between the classical definition of perfect competition and the microeconomics of imperfect perfection, this concept of exchange of transactions is looked upon in terms of a growing degree of price distortions caused by limited number of buyers and sellers. Such orientations in the concept of markets still provoke a consistent pursuit of price mechanism as the basis of exchange. Besides, price mechanisms in the sense of perfect and imperfect competition gives rise to some notion of market equilibrium and optimality in the allocation of resources. Thus, when market equilibrium, optimality of resource allocation and price mechanism join sides together in the midst of the transactional exchange nature of the market system, the end result is inconsistency within the methodology used to address such issues once in perfect and then in imperfect market models.

For instance, the objective function of profit maximizing oligopolistic firms is based on the same kind of first order conditions and marginal substitution principle of neoclassical economics as are found for profit maximizing firms in perfect competition. Consequently, although collusive price-setting and output-setting reaction functions characterize the decision making of oligopolists most importantly, yet the presence of optimization techniques using marginal substitution principle wipes out the robustness of essential decision-making features. On the other hand, any departure from the first and second order optimization conditions premised in marginal substitution principle renders a neoclassical treatment of profit maximization and market equilibrium for oligopolies, methodologically flawed.

Objective

In this chapter we will develop a concept of the market that explicitly brings out interactive decision-making processes while affecting pricing and output setting and resource allocation. In this sense of interactions and endogenizing of agent-specific preferences and production menus that go with it, we will explain the market in yet another way. The market is treated here as an explicit system of social contracts.

Questions on the Methodology of Oligopolistic Decision Making

1. A Critique of the Neoclassical Treatment of a Profit-Maximizing Oligopoly

The Contractarian Nature of Oligopolistic Decision Making

Alternative Concept of Market Contract

Social Contractarianism of Markets in the Literature: Hayek, Buchanan

1. Hayek's Market Catallaxy Process
2. Buchanan's Public Choice and Contractarianism

Formalizing a Model of the Market as a System of Social Contract

The Principle of Universal Complementarity vs the Neoclassical Marginalist 
Substitution Principle.

Examining Oligopolistic Behaviour in the Light of Knowledge-Induced Markets

An Example of a Market With Cooperative Contracts

Political Economy of Markets in the Globalization Process

Some Empirical Inferences on Markets and Globalization

Conclusion