Intertemporal Firm's Decisions in Imperfect General Equilibrium

Monopolistic general equilibrium models were firstly studied by Negishi (1961), more than forty years ago. In a sense, his model is a fully formalized attempt to introduce non competitive elements in genuine general equilibrium models. On the contrary, oligopoly models "a' la" Cournot are generally only partial equilibrium models. Imperfect general equilibrium, proposed and analysed by Nicola (1994), is a type of general equilibrium for a multisectoral many-person dynamic model, in which price decisions are directly taken by firms, period after period. To simplify, in Nicola (1994) the only input is labour, while the present paper extends the analysis of the firm by considering a firm whose inputs are labour and commodities produced by other firms. It is proved that solutions exist for this firm problem, both in the short run and in the long run, so that this generalized firm problem is suited to be included into the imperfect general equilibrium model.