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The Subgame Imperfection of Financial Capitalism

Author

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  • Amelia Correa

    (Department of Economics, St. Andrew’s College, Mumbai 400 058, India)

  • Romar Correa

    (Department of Economics, University of Mumbai, Vidyanagari, Mumbai 400 098, India)

  • D. Tripati Rao

    (Department of Economics, University of Mumbai, Mumbai 400 098, India)

  • Graciella Tavares

    (Department of Economics, St. Andrew’s College, Mumbai 400 058, India)

Abstract

We formulate and solve the Pasinetti (1962) model as a dynamic game played between capitalists and workers. The interest rate is shown to be bounded above. If the discount rates of capitalists and workers required to sustain cooperation between them exceed this interest rate the Nash equilibrium unravels. We introduce a bank whose sole objective is to lower the rate of interest. The financial intermediary cannot ensure the equality through time of the supply of and the demand for assets in general.

Suggested Citation

  • Amelia Correa & Romar Correa & D. Tripati Rao & Graciella Tavares, 2003. "The Subgame Imperfection of Financial Capitalism," Journal of Interdisciplinary Economics, , vol. 14(1), pages 3-12, January.
    • Handle: RePEc:sae:jinter:v:14:y:2003:i:1:p:3-12
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