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Unemployment equilibrium and economic policy in mixed markets

Listed author(s):
  • Ludovic A. JULIEN

    (Universite Paris Ouest-Nanterre La Defense and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

This paper considers a simple static Cournot-Nash model of an exchange economy with two productive sectors at flexible prices and wages. The traders in the atomless sector are price-takers, while the atoms behave strategically. We focus on the consequences of strategic interactions on the market outcome. Firstly, strategic interactions create underemployment on the labor market. Secondly, when the number of atoms increases without limit, the underemployment equilibrium coincides with the competitive equilibrium. Thirdly, we compare the welfare reached by traders at both equilibria. Fourthly, we consider the implementation of a tax levied on strategic supplies. Finally, we compare the approach retained with the usual monopolistic competition framework.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2009030.

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Length: 23
Date of creation: 05 Oct 2009
Handle: RePEc:ctl:louvir:2009030
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  18. Busetto, Francesca & Codognato, Giulio & Ghosal, Sayantan, 2008. "Cournot-Walras Equilibrium as a Subgame Perfect Equilibrium," The Warwick Economics Research Paper Series (TWERPS) 837, University of Warwick, Department of Economics.
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