Define the adoption of economic institutional arrangement in analytical frameworks.
Adoption of Economic Institutional Arrangement:
The third step for studying an economic framework is to adopt the economic institutional arrangements that are also termed as economic mechanisms that can be regarded as the rules of the game. Based onto the problem under consideration, an economic institutional arrangement could be exogenously specified or endogenously founded. For illustration, while studying individuals’ decisions into the theories of consumers and producers, one implicitly supposes that the undertaken mechanism is a competitive market mechanism acquires this as given. Nonetheless, when considering the option of economic institutions and arguing the optimality of the market mechanism, then the market institution is endogenously founded. The alternative mechanisms which are designed to resolve the problem of market failure are also endogenously founded. Economic arrangements must be designed differently for not same economic environments and behavior assumptions.