Models of monopolistic competition and general equilibrium theory

Opening, in October 1991, the session of the thirty-second annual meeting of the Italian Economic Society on ‘Equilibrium Theories: Recent Developments and New Critiques’, Giovanni Caravale forcefully stated the case for a new approach to the notion of equilibrium, which should be capable of constituting ‘the focal reference point of the attempt to interpret [economic] reality’. To this end, he maintained that ‘equilibrium should simultaneously represent: (1) a “significant” position; (2) a position that expresses the “rational” choices and behaviour of the “active” economic agents also in the presence of uncertainty; (3) a “long period position in the logical sense” ’ (Caravale 1997b: 18).