American Economic Review Vol. 82 No. 3 1992
The Coordination Problem and Equilibrium Theories of Recessions
Abstract
In this paper, we build on the recent literature on coordination problems to construct a model in which there is potential for low-output equilibrium. We 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. We study the case of separability and show that there is no rationing and, hence, no equilibrium unemployment. In addition, in a numerical example, we find that there is a unique symmetric equilibrium.
- Volume
- 82
- Issue
- 3
- Pages
- 451-471
- Sources
- bibtex:phds-export.bib