Underemployment of Resources and Self-fulfilling Beliefs: Non-Walrasian Allocations at Walrasian Prices
AbstractIn this paper the existence of unemployment is partly explained as being the result of coordination failures. It is shown that as a result of self-fulfilling pessimistic expectations, even at Walrasian prices, a continuum of equilibria results, among which an equilibrium with approximately no trade and a Walrasian equilibrium. These coordination failures also arise at other price systems, but then unemployment is the result of both a wrong price system and coordination failures. Some properties of the set of equilibria are analyzed. Generically, there exists a continuum of non-indifferent equilibrium allocations. Under a condition implied by gross substitutability, there exists a continuum of equilibrium allocations in the neighborhood of a competitive allocation, when prices are Walrasian. For a specialized economy, a dynamic illustration is offered.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 003.
Date of creation: 2001
Date of revision:
Contact details of provider:
Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm
mathematical economics and econometrics ;
Other versions of this item:
- Alessandro Citanna & Herve Cres & Antonio Villanacci, . "Underemployment of resources and self-fulfilling beliefs: Nonwalrasian allocations at walrasian prices," GSIA Working Papers 11, Carnegie Mellon University, Tepper School of Business.
- Antonio Villanacci & Alessandro Citanna & P. Jean-Jacques Herings & Jacques H Drèze & Hervé Crès, 2001. "Underemployment of Resources and Self-Fulfilling Beliefs: Nonwalrasian Allocations at Walrasian Prices," Sciences Po publications 003, Sciences Po.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Herings, P Jean-Jacques, 1996.
"Equilibrium Existence Results for Economies with Price Rigidities,"
Springer, vol. 7(1), pages 63-80, January.
- P. Jean-Jacques Herings, 1995. "Equilibrium existence results for economies with price rigidities," Economic Theory, Springer, vol. 7(1), pages 63-80.
- Herings, P.J.J., 1996. "Equilibrium Existence Results for Economies with Price Rigidities," Open Access publications from Maastricht University urn:nbn:nl:ui:27-5945, Maastricht University.
- Roberts, John, 1987. "An Equilibrium Model with Involuntary Unemployment at Flexible, Competitive Prices and Wages," American Economic Review, American Economic Association, vol. 77(5), pages 856-74, December.
- DREZE, Jacques H. & HERINGS, P. Jean-Jacques, 1998.
"Continua of underemployment equilibria,"
CORE Discussion Papers
1998045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Laroque, Guy, 1978. "The Fixed Price Equilibria: Some Results in Local Comparative Statics," Econometrica, Econometric Society, vol. 46(5), pages 1127-54, September.
- Dehez, Pierre & Dreze, Jacques H., 1984. "On supply-constrained equilibria," Journal of Economic Theory, Elsevier, vol. 33(1), pages 172-182, June.
- Herings, P. Jean-Jacques, 1998. "On the existence of a continuum of constrained equilibria1," Journal of Mathematical Economics, Elsevier, vol. 30(3), pages 257-273, October.
- repec:ner:louvai:info:hdl:2078.1/88419 is not listed on IDEAS
- repec:fth:louvco:9845 is not listed on IDEAS
- Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
- Dreze, Jacques H, 1975. "Existence of an Exchange Equilibrium under Price Rigidities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 301-20, June.
- Herings, P.J.J., 1998. "On the Existence of a Continuum of Constrained Equilibria," Open Access publications from Maastricht University urn:nbn:nl:ui:27-5938, Maastricht University.
- Jacques H.DREZE, 2001.
"On the Macroeconomics of Uncertainty and Incomplete Markets,"
Discussion Papers (REL - Recherches Economiques de Louvain)
2001011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- DREZE, Jacques, 1999. "On the macroeconomics of uncertainty and incomplete markets," CORE Discussion Papers 1999064, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Movshovich, Solomon M., 1994. "A price adjustment process in a rationed economy," Journal of Mathematical Economics, Elsevier, vol. 23(4), pages 305-321, July.
- Polterovich, V. M. & Spivak, V. A., 1983. "Gross substitutability of point-to-set correspondences," Journal of Mathematical Economics, Elsevier, vol. 11(2), pages 117-140, April.
- Drazen, Allan, 1980. "Recent Developments in Macroeconomic Disequilibrium Theory," Econometrica, Econometric Society, vol. 48(2), pages 283-306, March.
- Hahn, Frank, 1978. "On Non-Walrasian Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 45(1), pages 1-17, February.
- Laan, Gerard van der, 1982. "Simplicial approximation of unemployment equilibria," Journal of Mathematical Economics, Elsevier, vol. 9(1-2), pages 83-97, January.
- DREZE, Jacques H., 1997.
"Walras-Keynes equilibria coordination and macroeconomics,"
CORE Discussion Papers
1997051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dreze, Jacques H., 1997. "Walras--Keynes equilibria coordination and macroeconomics," European Economic Review, Elsevier, vol. 41(9), pages 1735-1762, December.
- repec:ner:louvai:info:hdl:2078.1/88097 is not listed on IDEAS
- Bryant, John, 1983. "A Simple Rational Expectations Keynes-Type Model," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 525-28, August.
- van der Laan, Gerard, 1980. "Equilibrium under Rigid Prices with Compensation for the consumers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 63-73, February.
- Kurz, Mordecai, 1982. "Unemployment equilibrium in an economy with linked prices," Journal of Economic Theory, Elsevier, vol. 26(1), pages 100-123, February.
- Hoog S. van der, 2005. "On the Micro-Dynamics of a Cash-in-Advance Economy (revised version of WP 04-12)," CeNDEF Working Papers 05-04, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Sander van der Hoog, 2004. "Credit and Cash-in-Advance in Disequilibrium Models," Computing in Economics and Finance 2004 294, Society for Computational Economics.
- Herings,P. Jean-Jacques, 2001. "Coordinating Thoughts on Coordination Failures," Research Memoranda 018, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charles Bollen).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.