Conjectural variations, symmetric equilibria and economic policy |
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Authors: | Ludovic A Julien |
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Institution: | aEconomiX, Université Paris Ouest-Nanterre La Défense, Bureau K116, 200 avenue de la République, 92001 Nanterre Cédex, France |
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Abstract: | In this paper, we consider conjectural variations in a simple static general equilibrium model under oligopolistic competition. The modeling of conjectures captures the role played by beliefs in a micro-founded model. So, the economy may have three kinds of symmetric general equilibria. Furthermore, these equilibria can be Pareto-ranked by the conjectural variation parameter. Finally, we consider the implementation of a tax on the strategic behaviors in case of balanced-budget rule. The comparative statics illustrates the idea according to which the effectiveness of the multiplier mechanism to mitigate the market distortions depends on the symmetric equilibrium considered. Therefore, the effect of the tax on the prices and economic activity depends on the degree of market power which is conjectured by the agents. |
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Keywords: | Strategic interactions The multiplier Tax policy |
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