Endogenously determined price rigidities (*)

P. Jean-Jacques Herings

Economic Theory, 1997, vol. 9, issue 3, 498 pages

Abstract: There exists an extensive literature about economies with price rigidities, where some constraints on the set of admissible price systems are exogenously given. In this paper a general equilibrium model extended by a political system is described where the price rigidities are endogenously chosen by political candidates. Sufficient conditions for the existence of a mixed strategy and a pure strategy equilibrium are given. Finally an example is discussed, where in equilibrium both political candidates propose price rigidities excluding the Walrasian equilibrium price system.

Date: 1997
Note: Received: September 15, 1994; revised version October 18, 1995
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Working Paper: Endogenously determined price rigidities (1994)
Working Paper: Endogenously determined price rigidities (1994)
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