Multiplicity of Cournot Equilibria and Involuntary Unemployment |
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Authors: | Leo Kaas |
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Affiliation: | Department of Economics, University of Bielefeld, 33501, Bielefeld, Germanyf1 |
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Abstract: | In an overlapping generations model with Cournot competition on the goods market it is shown that a continuum of stationary states and perfect foresight trajectories exists with unemployment at arbitrary low wages. Decisive for this is the influence that different forecast functions have on the objective demand curve, even though they are consistent with perfect foresight. With an example it is shown that simple adaptive and constant memory forecast rules generate such unemployment equilibria. The corresponding temporary equilibrium dynamics may display stable unemployment and unstable full employment equilibria.Journal of Economic LiteratureClassification Numbers: D43, D51, E24 |
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