The subjective approach to general equilibrium under imperfect competition

Source: RISEC: International Review of Economics and Business, September 2005, v. 52, iss. 3, pp. 319-53 Publication Date: September 2005 Abstract: We study the main problems of the "subjective" approach to general equilibrium under imperfect competition, initiated by Negishi (1961), and compare it with an "objective" approach, namely the Cournotian tradition, pioneered by Gabszewicz and Vial (1972). In particular, we investigate the relationship between static analysis and adjustment processes towards equilibrium. We show that the basic assumptions underlying the equilibrium notion proposed by Negishi are essentially different from those that characterize the Cournotian tradition and the attempts to interpret Negishi's theory as a special case of a more general Cournotian-type framework (Gary-Bobo, 1987, 1989) are in fact inconsistent with the original model. Moreover, we demonstrate that to formalize adjustment mechanisms toward equilibrium within Negishi's approach raises quite peculiar difficulties that can be to some extent overcome within the Cournotian approach.