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The Coordination Problem and Equilibrium Theories of Recessions

  • Jones, Larry E
  • Manuelli, Rodolfo E

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.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 82 (1992)
Issue (Month): 3 (June)
Pages: 451-71

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Handle: RePEc:aea:aecrev:v:82:y:1992:i:3:p:451-71
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