Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices
In 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.
(This abstract was borrowed from another version of this item.)
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Movshovich, Solomon M., 1994. "A price adjustment process in a rationed economy," Journal of Mathematical Economics, Elsevier, vol. 23(4), pages 305-321, July.
- Herings, P Jean-Jacques, 1996.
"Equilibrium Existence Results for Economies with Price Rigidities,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(1), pages 63-80, January.
- P. Jean-Jacques Herings, 1995. "Equilibrium existence results for economies with price rigidities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(1), pages 63-80.
- Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176, October.
- Kurz, Mordecai, 1982. "Unemployment equilibrium in an economy with linked prices," Journal of Economic Theory, Elsevier, vol. 26(1), pages 100-123, February.
- Mas-Colell,Andreu, 1990.
"The Theory of General Economic Equilibrium,"
Cambridge University Press, number 9780521388702, October.
- Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967, October.
- 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.
- 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).
- 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).
- Gérard Debreu (ed.), 1996. "General Equilibrium Theory," Books, Edward Elgar Publishing, volume 0, number 548, April.
- Laan, Gerard van der, 1982.
"Simplicial approximation of unemployment equilibria,"
Journal of Mathematical Economics,
Elsevier, vol. 9(1-2), pages 83-97, January.
- van der LAAN, Gerard, . "Simplicial approximation of unemployment equilibria," CORE Discussion Papers RP 467, 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.
- Drazen, Allan, 1980. "Recent Developments in Macroeconomic Disequilibrium Theory," Econometrica, Econometric Society, vol. 48(2), pages 283-306, March.
- 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.
- Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 441-463.
- 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.
- Herings, P.J.J., 1992. "On the structure of constrained equilibria," Research Memorandum FEW 587, Tilburg University, School of Economics and Management.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:36:y:2001:i:3:p:169-200. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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.