Topics in Trade Coordination of Planned Economies

The problem of price as an effective instrument for the coordination of the economies forming the CMEA community has been absorbing the thoughts of students for quite a time.

On the subject of modelling the regime of the CMEA relationship, and in particular modelling its price system, there exists a voluminous nonrigorous literature in the member countries. Its debate largely revolves around the applicability, or otherwise, of a Ricardian type comparative-cost principle. A strongly represented school of thought maintains that it is acceptable as a nucleus of a precept for a group of socialist (planning) nations.

So far we have been considering models with formalisms which, while acknowledging some separateness and possibly also a hierarchy of goals pursued, are not fully explicit in dealing with the conflicts of interests, and in particular with respect to the mode of the hierarchic guidance of the process. To deal with this aspect it may be of use to discuss the possible organization of this process in the CMEA in game-theoretic and control-theoretic terms (1).

In selecting the approach and apparatus for our model of inter-CMEA trade and pricing, our preference is for those of a differential game. The question may then be validly asked: why specifically this type of game? In answer we would point to its two features relevant for the problem we are dealing with: