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Endogenously determined price rigidities (*)

Author

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  • P. Jean-Jacques Herings

    (Department of Econometrics and CentER, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, THE NETHERLANDS)

Abstract

There exists an extensive literature about economies with price rigidities, where some constraints on the set of admissible price systems are exogenously given. In this paper a general equilibrium model extended by a political system is described where the price rigidities are endogenously chosen by political candidates. Sufficient conditions for the existence of a mixed strategy and a pure strategy equilibrium are given. Finally an example is discussed, where in equilibrium both political candidates propose price rigidities excluding the Walrasian equilibrium price system.

Suggested Citation

  • P. Jean-Jacques Herings, 1997. "Endogenously determined price rigidities (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(3), pages 471-498.
    • Handle: RePEc:spr:joecth:v:9:y:1997:i:3:p:471-498
    Note: Received: September 15, 1994; revised version October 18, 1995
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    References listed on IDEAS

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    1. McKelvey, Richard D. & Ordeshook, Peter C., 1976. "Symmetric Spatial Games Without Majority Rule Equilibria," American Political Science Review, Cambridge University Press, vol. 70(4), pages 1172-1184, December.
    2. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 1-26.
    3. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 27-41.
    4. Nguyen, Trien T & Whalley, John, 1990. "General Equilibrium Analysis of Price Controls: A Computational Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 667-684, August.
    5. Nguyen, Trien T. & Whalley, John, 1986. "Equilibrium under price controls with endogenous transactions costs," Journal of Economic Theory, Elsevier, vol. 39(2), pages 290-300, August.
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    Cited by:

    1. Khan, Abhimanyu & Peeters, Ronald, 2015. "Imitation by price and quantity setting firms in a differentiated market," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 28-36.
    2. Herings, P.J.J., 2001. "Coordinating thoughts on coordination failures," Research Memorandum 030, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    3. Bouhtou, M. & van Hoesel, C.P.M. & van der Kraaij, A.F. & Lutton, J.L., 2002. "Linear tarification in multi-commodity telecommunications networks," Research Memorandum 012, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    4. Abhimanyu Khan & Ronald Peeters, 2020. "Evolution of Behavior When Duopolists Choose Prices and Quantities," Dynamic Games and Applications, Springer, vol. 10(2), pages 493-508, June.
    5. Herings, P. Jean-Jacques & Konovalov, Alexander, 2009. "Constrained suboptimality when prices are non-competitive," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 43-58, January.
    6. Tuinstra, Jan, 2000. "The emergence of political business cycles in a two-sector general equilibrium model," European Journal of Political Economy, Elsevier, vol. 16(3), pages 509-534, September.
    7. Vasil'ev, Valery & Wiesmeth, Hans, 2008. "Equilibrium in a mixed economy of arrow-debreu type," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 132-147, January.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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