ABSTRACTThis paper formulates a general equilibrium market economy where consumers are « perfect competitors » but producers take advantage of their ability to influence prices. It is shown that in such a model it is not reasonable for producers to attempt to maximize profits. Conditions are presented under which there exists a solution for such an economy which is Pareto‐efficient for theownersof the firms. Finally, it is shown that a pecuniary externality makes the core a very weak solution concept to use in analysing rivalry among produc