Uncertainty and Endogenous Selection of Economic Equilibria
This paper presents a model of co-ordination failures based on market power and local oligopoly. The economy exhibits a multiplicity of Pareto-ranked equilibria. The introduction of uncertainty generates an endogenous equilibrium selection process, due to a strategic use of information by firms. The economy is more likely to settle on some equilibria than on others. We argue that a full understanding of these robustness criteria is needed before any policy which is intended to help co-ordinate the level of activity to a Pareto dominant outcome can be successfully implemented.
|Date of creation:||24 Jun 2003|
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|Order Information:|| Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma|
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