§12. Interest Fixed for an Individual

It is a fact long recognized by price theorists,7 that the theoretical determination of any price in a special trade or haggle between two persons, each of whom is conscious of his influence on that one price, is more complicated than in a full-fledged competitive market in which each individual is so small a factor as to be unconscious of his influence on the market price. We here assume such a Edition: current; Page: [253] general market, in which a single buyer, or lender, is so small a factor that he is not actuated by any consciousness of influencing the market rate of interest. Each person finds the rate fixed for him. We assume, for the purpose of the present illustration, that the rate so fixed for him by the market is 10 per cent.