There are two approaches to a theory of general equilibrium in an imperfectly competitive environment; most writers who touch on public policy questi… - Kenneth Arrow

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There are two approaches to a theory of general equilibrium in an imperfectly competitive environment; most writers who touch on public policy questions implicitly accept one or the other of these prototheories without always recognizing that they have made such a choice. One assumes that all transactions are made according to the price system, that is, the same price is charged for all units of the same commodity; this is the monopolistic competition approach. The alternative approach assumes unrestricted bargaining; this is the game theory approach. The first might be deemed appropriate if the costs of bargaining were high relative to the costs of ordinary pricing, while the second assumes costless bargaining.