On conflicting expectations in temporary equilibrium models

This paper points out some difficulties that the consideration of subjective expectations induces in temporary general equilibrium models with production. In particular, it shows that the divergence of agents' expectations may prevent an acceptable representation of the interplay between firms and households on the saving-investment market. The argument is developed with reference to the most representative models in the literature, which share the assumption that the plans of production are selected by the managers of firms according to their own expectation of future prices.