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Production in General Equilibrium with Incomplete Markets

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  • Pascal Stiefenhofer

Abstract

Short and long run production is introduced in a two period general equilibrium model with incomplete markets, where firms are profit maximizers. They maximize profits in the long run, which implies profit maximization over both periods. The sequential structure of the model is such that, firms issue shares in the short run in order to build up long run production capacity. Long run production takes place in the second period subject to long run technological feasibility and installed capacity constraints. It is shown that equilibrium exists generically.

Suggested Citation

  • Pascal Stiefenhofer, 2009. "Production in General Equilibrium with Incomplete Markets," Discussion Papers 09/06, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:09/06
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    References listed on IDEAS

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    More about this item

    Keywords

    General Equilibrium; Incomplete Markets; Production.;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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