There has in the past several years been a revival of interest in the topic of inventory fluctuation and its relationship to the short-run dynamics of output. One important reason for this interest can be traced to the pioneering work on aggregate supply begun by Lucas [11; 12] and extended among many others, by Barro [3; 4]. In their models, the behavior of output is driven by intertemporal considerations. It is a natural extension of such models, if output is storable, to consider the implication of producers whose current output can either be sold immediately or held in stock for future sales. Current sales, by the same token, may be either current production or goods from inventory. In a recent paper Blinder and Fischet [6] develop such a model. Using it they demonstrate that inventory dynamics can be an explanation for an empirical weakness of simple versions of the Lucas-type models real world business cycles are characterized by considerable persistence; simple equilibrium business cycle models do not exhibit such persistence, or in some cases it is present only through the ad hoc presence of a lagged output term in the aggregate supply function. Except for the influence of inventories, producers in the Blinder-Fischer analysis behave as do producers in most new classical macro models. They are price-takers and quantity-setters. In a model where inventories exert an influence on output decisions such neoclassical behavior cannot be ascribed to perfectly competitive conditions. If firms are perfect competitors, output decisions will not reflect the state of current inventories.