Incomplete Information Bargaining and Business Cycles
This paper presents a one-sided incomplete (asymmetric) information bargaining game in a dynamic general equilibrium framework. The model predicts business cycle movements in the economy with persistence mechanism arising from asymmetric information and search. The employment level is procyclical without the help of unusually high values of intertemporal elasticity of substitution, the real wage is procyclical but rigid. In addition, quits are procyclical and lay-offs countercyclical. Even if relevant information is revealed by the aggregate price level, the qualitative properties of the model do not change. The paper also discusses the efficiency issue. Firstly, contracts are shown to be more efficient than bargaining. Secondly, the decentralised equilibrium does not exploit the informational externalities that exist and the resulting sequence of equilibria are not only first-best inefficient but also second best inefficient.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Jan 1992|
|Contact details of provider:|| Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP|
When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0060. 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: ()
If references are entirely missing, you can add them using this form.