Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices

Alessandro Citanna, Hervé Crès, Jacques Drèze, P. Jean Jacques Herings, Antonio Villanacci

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Pages (from-to)169-200
Number of pages32
JournalJournal of Mathematical Economics
Volume36
Issue number3
DOIs
StatePublished - Dec 1 2001

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Continuum
Unemployment
Walrasian Equilibrium
Gross
Underemployment
Coordination failure

Keywords

  • C62
  • Coordination failures
  • D51
  • General equilibrium
  • Indeterminacy
  • Underemployment

ASJC Scopus subject areas

  • Economics and Econometrics
  • Applied Mathematics

Cite this

Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices. / Citanna, Alessandro; Crès, Hervé; Drèze, Jacques; Herings, P. Jean Jacques; Villanacci, Antonio.

In: Journal of Mathematical Economics, Vol. 36, No. 3, 01.12.2001, p. 169-200.

Research output: Contribution to journalArticle

Citanna, Alessandro ; Crès, Hervé ; Drèze, Jacques ; Herings, P. Jean Jacques ; Villanacci, Antonio. / Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices. In: Journal of Mathematical Economics. 2001 ; Vol. 36, No. 3. pp. 169-200.
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