Type
Working paper
Titre
Underemployment of Resources and Self-Fulfilling Beliefs: Nonwalrasian Allocations at Walrasian Prices
Dans
Research Memoranda
Auteur(s)
CITANNA Alessandro - Groupement de Recherche et d'Etudes en Gestion à HEC (Auteur)
CRÈS Hervé - (Auteur)
DRÈZE Jacques H. - Center of Operation Research and Econometrics (Louvain) (Auteur)
HERINGS Jean-Jacques - Center of Operation Research and Econometrics (Louvain) (Auteur)
VILLANACCI Antonio - DIMADEFAS, Università degli Studi di Firenze (Auteur)
Éditeur
Maastricht : Maastricht research School of Economics of Technology and Organizations
Collection
Research Memoranda : 003
Résumé
EN
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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