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Strategic Behavior, Real Rigidities, and Production Coordination Failures

Author

Listed:
  • Ralph C. Allen

    (College of Business Administration, Valdosta State University)

  • Jack H. Stone

    (Spelman College)

Abstract

This paper develops a real-exchange production-coordination model in which price-setting firms produce complementary inputs that are converted into and traded for a final good produced by a competitive sector. A rigid real-price regime is shown to be consistent with both rational firm behavior and welfare-ranked Nash equilibria, although not with a Pareto optimal equilibrium. The model demonstrates the existence of non-unique, sustainable real-price sets for various coordinated-production levels with a unique price set at a sustainable maximum output level. Without both production and price coordination, the model may produce a Nash equilibrium at a low output level.

Suggested Citation

  • Ralph C. Allen & Jack H. Stone, 2001. "Strategic Behavior, Real Rigidities, and Production Coordination Failures," Eastern Economic Journal, Eastern Economic Association, vol. 27(3), pages 267-286, Summer.
    • Handle: RePEc:eej:eeconj:v:27:y:2001:i:3:p:267-286
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/eeconj/Volume27/V27N3P267_286.pdf
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    Cited by:

    1. Javier Carrillo-Hermosilla, 2005. "IE WP 02/04 Technology and the environment: an evolutionary approach to sustainable technological change," Others 0509004, University Library of Munich, Germany.

    More about this item

    Keywords

    Prices;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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