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Endogenously determined price rigidities (*)

Author

Listed:
  • P. Jean-Jacques Herings

    (Department of Econometrics and CentER, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, THE NETHERLANDS)

Abstract

There exists an extensive literature about economies with price rigidities, where some constraints on the set of admissible price systems are exogenously given. In this paper a general equilibrium model extended by a political system is described where the price rigidities are endogenously chosen by political candidates. Sufficient conditions for the existence of a mixed strategy and a pure strategy equilibrium are given. Finally an example is discussed, where in equilibrium both political candidates propose price rigidities excluding the Walrasian equilibrium price system.

Suggested Citation

  • P. Jean-Jacques Herings, 1997. "Endogenously determined price rigidities (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(3), pages 471-498.
  • Handle: RePEc:spr:joecth:v:9:y:1997:i:3:p:471-498
    Note: Received: September 15, 1994; revised version October 18, 1995
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    Cited by:

    1. Khan, Abhimanyu & Peeters, Ronald, 2015. "Imitation by price and quantity setting firms in a differentiated market," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 28-36.
    2. Herings, P. Jean-Jacques & Konovalov, Alexander, 2009. "Constrained suboptimality when prices are non-competitive," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 43-58, January.
    3. Vasil'ev, Valery & Wiesmeth, Hans, 2008. "Equilibrium in a mixed economy of arrow-debreu type," Journal of Mathematical Economics, Elsevier, vol. 44(2), pages 132-147, January.
    4. Tuinstra, Jan, 2000. "The emergence of political business cycles in a two-sector general equilibrium model," European Journal of Political Economy, Elsevier, vol. 16(3), pages 509-534, September.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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