Some Implications of Imperfect Competition for Recent Trade Theory

Koji Shimomura

Review of International Economics, 1995, vol. 3, issue 2, 244-47

Abstract: This paper argues that in a general-equilibrium context, it is not sensible for oligopolistic (and monopolistically competitive) firms to maximize profit, because the outcome would be sensitive to the choice of the numeraire. The natural objective of these firms would be to maximize the utility of the shareholders if the shareholders are identical. I show that even if each firm takes the representative individual's marginal utility of income as given, the outcome of the utility maximization objective is Pareto optimal, and in equilibrium, each firm equates price with marginal cost. Copyright 1995 by Blackwell Publishing Ltd.

Date: 1995
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