We consider a firm acting strategically on behalf of its shareholder. The price normalization problem arising in general equilibrium models of imperfect competition can be overcome by using the concept of real wealth maximization. This concept is based on shareholders´ aggregate demand and does...

We use the two-factor, two-sector, two-country model of Melvin and Warne (1973) and Markusen (1981), in which the production of one good is monopolized in each country, in order to investigate the role of the price normalization. We illustrate several puzzling effects that occur if the price...