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Behaviour of Firms Subject to Imperfect Markets


Misra P N

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A survey of available theories in economic literature would reveal that analysis of a firm’s behaviour is performed, either, under the assumption of perfect competition in factor as well as output markets or by letting imperfections to prevail in these markets separately and then examining firm’s decision making process in each case. At the same time it is widely accepted that perfect market conditions are simple a myth. In the present paper we analyse the behaviour of firm under imperfect market condition prevailing simultaneously in all the output and input markets. It is shown that the present approach enables us to solve for optimal magnitudes of size of the firm, factors of production, factor prices and the product price. We also discuss role of taxation on various aspects of the firm.