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This is the first of two parts of a paper in which we shall develop microeconomic price models of monopolistic competition using methods and tools of feedback theory. The models discussed are based on an approach presented by Billstroem and Thore in 1964. In the second part we will develop a different approach which can better deal with real problems. All feedback models will be simulated by means of the simulation language CSMP/360 III.

In the previous issue of this Journal, the authors described, analysed and enlarged a micro‐economic model by Billstroem and Thore. In this part they present their own simulation model. The model is a three loop system of price‐, advertising‐, production‐, and stock‐policy. Main differences compared with the Billstroem/Thore‐approach are: The model includes interactions between the different business policies mentioned. Both control‐variables and exogenous disturbance‐variables have been included. Each of three subsystems is controlled by a regulator and feed‐forward control unit. Therefore the model of Billstroem/Thore can be called a feedback approach, while the model to be introduced is a feedback‐feed‐forward system with disturbance.