Macroeconomic coordination failure under oligempory

Paul Madden () and Esma Gaygisiz ()
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Paul Madden: School of Economic Studies, University of Manchester, Manchester M13 9PL, UK
Esma Gaygisiz: Department of Economics, Middle East Technical University, Ankara, TURKEY

Economic Theory, 2002, vol. 20, issue 1, 93-112

Abstract: Each sector of a multi-sector overlapping generations model is an oligempory with a given number of firms, oligopsonists in the sectoral (spatially differentiated) labour market and oligopolists in the sectoral (homogeneous) output market. When there is aggregate unemployment, and a firm raises wages beyond the local full employment level acquiring labour from neighbours, sectoral output supply becomes constant and the firm faces a flat output demand curve under constant returns to labour (upward sloping under decreasing returns). Multiple temporary equilibria and Pareto-ranked steady-state equilibria emerge; the associated sunspot equilibria exhibit counter-cyclical markups, inter alia.

Keywords: Oligempory; Coordination failure; Sunspot equilibria. (search for similar items in EconPapers)
JEL-codes: D43 E32 (search for similar items in EconPapers)
Date: 2002-02-20
Note: Received: February 28, 2000; revised version: March 16, 2001
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