THE ROLE OF DECISION-MAKING MECHANISMS IN ESTABLISHING MARKET EQUILIBRIUM

Abstract

The influence of decision-making mechanisms by economic agents on the establishment of market equilibrium is analyzed. In particular, the problem of determining the equilibrium price for incomplete information about the product and when consumer behavior is not rational is examined. Among other things, the approaches characteristic of institutional economic theory are used.
Two models of establishing the equilibrium price in the market of goods are proposed, on the basis of which influence of decision-making mechanisms on equilibrium parameters is determined. The first model considers two modes of decision-making by market agents. In one case, agents have complete information about the product, and in another to assess its quality use the mathematical expectation for the usefulness of the product, which is considered as a random variable with a known distribution function. It is shown that the decision-making mode qualitatively affects the equilibrium price of goods on the market. In particular, in this case, the equilibrium price depends differently on the total income of economic agents.
The second model describes the price competition of two firms that offer identical products on the market. In it, the behavior of economic agents in decision-making is modeled as one that is rational with a certain probability. It is shown that in the presence of agents with this type of limited-rational behavior in the market there can be two prices for the same product. In such circumstances, a firm that loses in price competition does not leave the market, but only loses some customers.