A Non-Walrasian General Equilibrium Model with Monopolistic Competition and Bargaining
In a general equilibrium framework, this paper tries to reproduce an important stylized fact of real economies : firms set prices under demand uncertainty while consumption decisions are taken when prices are already known. Under these conditions, there is place for a quantity rationing equilibrium since preferences are revealed when prices are already set and market-clearing can not be attained through changes in prices. " Demand heterogeneity " is introduced in the model and related to " demand uncertainty " : when firms set prices, their own market shares are not known with certainty, even if aggregate demand and the distribution of market shares are common knowledge. The main properties of the aggregate equilibrium are : (a) some markets are demand constrained while other markets are supply constrained, (b) aggregate production is smaller demand and full-employment output, (c) there is (involuntary) unemployment, and (d) effective demand is greater than a national demand, implying a positive spill-over effect.
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|Date of creation:||01 Jan 1992|
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"A Discussion of Belgian Unemployment, Combining Traditional Concepts and Disequilibrium Econometrics,"
London School of Economics and Political Science, vol. 53(210(S)), pages 89-119, Supplemen.
- SNEESSENS, Henri R. & DREZE, Jacques H., "undated". "A discussion of Belgian unemployment, combining traditional concepts and disequilibrium econometrics," CORE Discussion Papers RP 704, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Sneessens, H. & Dreze, J., 1985. "A discussion of Belgian unemployment, combining traditional concepts and disequilibrium econometrics," CORE Discussion Papers 1985040, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- Kooiman, P, 1984. "Smoothing the Aggregate Fix-Price Model and the Use of Business Survey Data," Economic Journal, Royal Economic Society, vol. 94(376), pages 899-913, December.
- Jean-Pascal Benassy, 1976. "The Disequilibrium Approach to Monopolistic Price Setting and General Monopolistic Equilibrium," Review of Economic Studies, Oxford University Press, vol. 43(1), pages 69-81.
- Sneessens, Henri R., 1987. "Investment and the inflation-unemployment tradeoff in a macroeconomic rationing model with monopolistic competition," European Economic Review, Elsevier, vol. 31(3), pages 781-808, April.
- Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September. Full references (including those not matched with items on IDEAS)
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