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The Coordination Problem and Equilibrium Theories of Recessions

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  • Larry E. Jones
  • R. E. Manuelli

Abstract

In this paper, the authors build on the recent literature on coordination problems to construct a model in which there is potential for low-output equilibrium. The authors show that the conditions that guarantee interior Walrasian equilibria, in conjunction with a continuity restriction on strategies, rule out equilibria with extremely low levels of activity (zero activity), which is a distinguishing feature of many existing models. They study the case of separability and show that there is no rationing and, hence, no equilibrium unemployment. In addition, in a numerical example, the authors find that there is a unique symmetric equilibrium. Copyright 1992 by American Economic Association.
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Suggested Citation

  • Larry E. Jones & R. E. Manuelli, 1987. "The Coordination Problem and Equilibrium Theories of Recessions," Discussion Papers 753, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:753
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    Cited by:

    1. Kaas, Leo & Madden, Paul, 1999. "Equilibrium Involuntary Unemployment under Oligempory," Economics Series 68, Institute for Advanced Studies.
    2. Dreze, Jacques H., 1997. "Walras--Keynes equilibria coordination and macroeconomics," European Economic Review, Elsevier, vol. 41(9), pages 1735-1762, December.
    3. Huck, Steffen, 1996. "Rationing and rationality," European Journal of Political Economy, Elsevier, vol. 12(4), pages 641-669, December.
    4. Herings, P.J.J. & Dreze, J., 1998. "Continua of Underemployment Equilibria," Discussion Paper 1998-05, Tilburg University, Center for Economic Research.
    5. Fagnart, Jean-Francois & Pierrard, O. & Sneessens, Henri R., 2007. "Microeconomic uncertainty and macroeconomic indeterminacy," European Economic Review, Elsevier, vol. 51(6), pages 1564-1588, August.
    6. Chari, V V & Jones, Larry E & Manuelli, Rodolfo E, 1989. "Labor Contracts in a Model of Imperfect Competition," American Economic Review, American Economic Association, vol. 79(2), pages 358-363, May.
    7. Olivier SCAILLET, 2001. "Density Estimation Using Inverse and Reciprocal Inverse Guassian Kernels," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. Levin, Dan & Peck, James, 2008. "Investment dynamics with common and private values," Journal of Economic Theory, Elsevier, vol. 143(1), pages 114-139, November.
    9. Russell Cooper & Andrew John, 2000. "Imperfect competition and macroeconomics : Theory and quantitative implications," Cahiers d'Économie Politique, Programme National Persée, vol. 37(1), pages 289-328.
    10. repec:ebl:ecbull:v:4:y:2008:i:29:p:1-8 is not listed on IDEAS
    11. Julien, Ludovic A., 2003. "Chômage d’équilibre, équilibres multiples et défauts de coordination," L'Actualité Economique, Société Canadienne de Science Economique, vol. 79(4), pages 523-562, Décembre.

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