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Budget constraint of a firm and economic theory (*)

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  • M. Kiyoshi Kuga

    (Institute of Social and Economic Research, Osaka University, 6-1, Mihogaoka, Ibaraki, Osaka 567, JAPAN)

Abstract

Firms in reality are subject to budget constraints which general equilibrium theorists have paid little attention. Using Morishima (1950, 1992) model, this paper deals with firms that are subject to budgets pertaining to sales and investment decisions, and proves the existence of a general equilibrium. We show that an economy with firms subject to budgets does not necessarily satisfy the efficiency proposition, and clarify how the total profit maximum condition in the Arrow- Debreu (1954) type economy ensures an "efficiency" in a limited dynamic sense.

Suggested Citation

  • M. Kiyoshi Kuga, 1996. "Budget constraint of a firm and economic theory (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 137-153.
    • Handle: RePEc:spr:joecth:v:8:y:1996:i:1:p:137-153
    Note: Received: February 4, 1994; revised version July 11, 1994
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    Cited by:

    1. Zhao, Guo, 2014. "Dynamic Production Theory under No-arbitrage Constraints," MPRA Paper 65166, University Library of Munich, Germany.

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