Equilibrium Involuntary Unemployment under Oligempory
AbstractWe show that equilibrium involuntary unemployment emerges in a multiâstage game model where all market power resides with firms, on both the labour and the output market. Firms decide wages, employment, output and prices, and under constant returns there exists a continuum of subgame perfect Nash equilibria involving unemployment and positive profits. A firm does not undercut the equilibrium wage since then high wage firms would attract its workers, thus forcing the undercutting firm out of both markets. Full employment equilibria are payoff dominated by unemployment equilibria, and the arguments are robust to decreasing returns.
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Bibliographic InfoPaper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 0213.
Date of creation: 2002
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Other versions of this item:
- Kaas, Leo & Madden, Paul, 1999. "Equilibrium Involuntary Unemployment under Oligempory," Economics Series 68, Institute for Advanced Studies.
- L Kaas & P Madden, 2002. "Equilibrium Involuntary Unemployment Under Oligempory," Centre for Growth and Business Cycle Research Discussion Paper Series 21, Economics, The Univeristy of Manchester.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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