Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices - Sciences Po Access content directly
Journal Articles Journal of Mathematical Economics Year : 2001

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.
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hal-03416643 , version 1 (05-11-2021)

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Alessandro Citanna, Hervé Crès, Jacques Drèze, Jean-Jacques Herings, Antonio Villanacci. Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices. Journal of Mathematical Economics, 2001, 36 (3), pp.169 - 200. ⟨hal-03416643⟩
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