Criticisms
To a large degree the indeterminacy result relies on the assumption that the results of bargaining are indeterminate or, at the very least, outside the realm of economic speculation. Modern advances in game theory, such as those developed by John Nash, challenge this assumption and derive stable equilibria (such as the Nash equilibrium ) in complicated bargaining situations. Further, Edgeworth's proposed recontracting process is highly stylised, involving traders obtaining information by costlessly making, breaking and re-making contracts with each other. Marshall strongly criticised Edgeworth on this point. If the recontracting process does not explain real world behaviour then the result that the price-taking equilibrium point will be reached by competitive traders will not necessarily be true.
Read more about this topic: Edgeworth's Limit Theorem
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