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Journal articles
Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices
Abstract : In this paper, the existence of unemployment is partly explained as being the result of coordination failures. It is shown that as a result of self-fulfilling pessimistic expectations, even at Walrasian prices, a continuum of equilibria results, among which an equilibrium with approximately no trade and a Walrasian equilibrium. These coordination failures also arise at other price systems, but then unemployment is the result of both a wrong price system and coordination failures. Some properties of the set of equilibria are analyzed. Generically, there exists a continuum of non-indifferent equilibrium allocations. Under a condition implied by gross substitutability, there exists a continuum of equilibrium allocations in the neighborhood of a competitive allocation, when prices are Walrasian. For a specialized economy, a dynamic illustration is offered.
https://hal-sciencespo.archives-ouvertes.fr/hal-03416643
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Submitted on : Friday, November 5, 2021 - 12:12:06 PM
Last modification on : Tuesday, December 7, 2021 - 4:26:04 PM
Contributor : Spire Sciences Po Institutional Repository Connect in order to contact the contributor
Submitted on : Friday, November 5, 2021 - 12:12:06 PM
Last modification on : Tuesday, December 7, 2021 - 4:26:04 PM