03 - 23 The Organization of Production , Consumption , and Learning

This paper provides an extension of general equilibrium theory that incorporates the actions of individuals both as demanders and suppliers of goods and as members of ...rms, schools, social groups, and contractual relationships. The central notion of the paper is a group: a collection of individuals associated with one another for some purpose. The model takes as primitive an exogenous set of group types, interpretable as (potential) ...rms, schools, social groups, contracts etc. The types of schools and ...rms that materialize in equilibrium, as well as the way that agents acquire skills, are determined endogenously in a competitive market, as are the contracts they enter into, and the production and consumption of private commodities. The model is well-founded (equilibrium exists) and passes a basic test of perfect competition (coincidence of the core with the set of equilibrium states). Examples and Applications illustrate the ‡exibility and power of the framework.