Strategic Behavior, Real Rigidities, and Production Coordination Failures

Ralph Allen () and Jack Stone
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Ralph Allen: College of Business Administration, Valdosta State University
Jack Stone: Spelman College

Eastern Economic Journal, 2001, vol. 27, issue 3, 267-286

Abstract: This paper develops a real-exchange production-coordination model in which price-setting firms produce complementary inputs that are converted into and traded for a final good produced by a competitive sector. A rigid real-price regime is shown to be consistent with both rational firm behavior and welfare-ranked Nash equilibria, although not with a Pareto optimal equilibrium. The model demonstrates the existence of non-unique, sustainable real-price sets for various coordinated-production levels with a unique price set at a sustainable maximum output level. Without both production and price coordination, the model may produce a Nash equilibrium at a low output level.

Keywords: Prices (search for similar items in EconPapers)
JEL-codes: E12 E24 E31 (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:27:y:2001:i:3:p:267-286

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