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The Coordination Problem and Equilibrium Theories of Recessions

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  • Jones, Larry E
  • Manuelli, Rodolfo E

Abstract

In this paper, the authors build on the recent literature on coordination problems to construct a model in which there is potential for low-output equilibrium. The authors show that the conditions that guarantee interior Walrasian equilibria, in conjunction with a continuity restriction on strategies, rule out equilibria with extremely low levels of activity (zero activity), which is a distinguishing feature of many existing models. They study the case of separability and show that there is no rationing and, hence, no equilibrium unemployment. In addition, in a numerical example, the authors find that there is a unique symmetric equilibrium. Copyright 1992 by American Economic Association.

Suggested Citation

  • Jones, Larry E & Manuelli, Rodolfo E, 1992. "The Coordination Problem and Equilibrium Theories of Recessions," American Economic Review, American Economic Association, vol. 82(3), pages 451-471, June.
    • Handle: RePEc:aea:aecrev:v:82:y:1992:i:3:p:451-71
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    Cited by:

    1. Kaas, Leo & Madden, Paul, 1999. "Equilibrium Involuntary Unemployment under Oligempory," Economics Series 68, Institute for Advanced Studies.
    2. Dreze, Jacques H., 1997. "Walras--Keynes equilibria coordination and macroeconomics," European Economic Review, Elsevier, vol. 41(9), pages 1735-1762, December.
    3. Huck, Steffen, 1996. "Rationing and rationality," European Journal of Political Economy, Elsevier, vol. 12(4), pages 641-669, December.
    4. Herings, P.J.J. & Dreze, J., 1998. "Continua of Underemployment Equilibria," Discussion Paper 1998-05, Tilburg University, Center for Economic Research.
    5. Mathieu Taschereau-Dumouchel & Edouard Schaal, 2015. "Coordinating Business Cycles," 2015 Meeting Papers 178, Society for Economic Dynamics.
    6. Fagnart, Jean-Francois & Pierrard, O. & Sneessens, Henri R., 2007. "Microeconomic uncertainty and macroeconomic indeterminacy," European Economic Review, Elsevier, vol. 51(6), pages 1564-1588, August.
    7. 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).
    8. Chari, V V & Jones, Larry E & Manuelli, Rodolfo E, 1989. "Labor Contracts in a Model of Imperfect Competition," American Economic Review, American Economic Association, vol. 79(2), pages 358-363, May.
    9. Olivier SCAILLET, 2001. "Density Estimation Using Inverse and Reciprocal Inverse Guassian Kernels," LIDAM Discussion Papers IRES 2001017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Levin, Dan & Peck, James, 2008. "Investment dynamics with common and private values," Journal of Economic Theory, Elsevier, vol. 143(1), pages 114-139, November.
    11. Russell Cooper & Andrew John, 2000. "Imperfect competition and macroeconomics : Theory and quantitative implications," Cahiers d'Économie Politique, Programme National Persée, vol. 37(1), pages 289-328.
    12. repec:ebl:ecbull:v:4:y:2008:i:29:p:1-8 is not listed on IDEAS
    13. Julien, Ludovic A., 2003. "Chômage d’équilibre, équilibres multiples et défauts de coordination," L'Actualité Economique, Société Canadienne de Science Economique, vol. 79(4), pages 523-562, Décembre.
    14. Herings, P.J.J. & Dreze, J., 1998. "Continua of Underemployment Equilibria," Discussion Paper 1998-05, Tilburg University, Center for Economic Research.
    15. Amedeo Panci, 1999. "Multiple equilibria: coordination failure and endogenous cycle," Working Papers in Public Economics 30, University of Rome La Sapienza, Department of Economics and Law.

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