The Nature of the Market

47 Pages Posted: 6 Apr 2022

See all articles by Yijiang Wang

Yijiang Wang

Cheung Kong Graduate School of Business

Date Written: March 24, 2022


This paper offers a framework for studying how violence determines political systems and market types in pairs to explain the nature of and road to the (Smithian) market. In the modeled Hobbesian society, parties prepare for war to acquire wealth but end in war or peace depending on their relative military force. Under certain conditions, they may create a government with built-in checks and balances to achieve peace at lower costs and support the market featuring cost-efficiency, full equality, and unlimited scale. The theory systematically explains the political foundations of markets and has strong policy implications.

Keywords: Violence, institutions, political system, market type, Cournot game.

JEL Classification: A1, B3, D0, H1, N0, P5.

Suggested Citation

Wang, Yijiang, The Nature of the Market (March 24, 2022). Available at SSRN: or

Yijiang Wang (Contact Author)

Cheung Kong Graduate School of Business ( email )

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