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Unemployment equilibrium and economic policy in mixed markets

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  • Julien, Ludovic A.

Abstract

This paper features a simple static Cournot-Nash model of an exchange economy with two productive sectors at flexible prices and wages. The traders in the atomless sector are price-takers, while the atoms behave strategically. We focus on the consequences of strategic interactions on the market outcome. Firstly, strategic interactions create underemployment on the labor market. Secondly, when the number of atoms increases without limit, the CWE coincides with the competitive equilibrium. Thirdly, we compare the welfare reached by traders at both equilibria. Fourthly, we consider the implementation of a tax levied on strategic supplies. Finally, we compare the approach retained with the monopolistic competition framework.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264999311000897
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 4 (July)
Pages: 1931-1940

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1931-1940
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

Keywords: Strategic interactions Welfare Tax;

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