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Short-Run Expectational Coordination: Fixed Versus Flexible Wages

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  • Roger Guesnerie

Abstract

This paper considers a simple "three-goods" model and focuses attention on the expectational stability of its equilibria. The setting allows us to describe stylized general equilibrium macro interactions: firms hire workers and then sell production to buyers whose purchasing power depends on the firms' previous decisions. We assess expectational stability from an "eductive" learning procedure that reflects basic rationality considerations. From our viewpoint on coordination, we compare the merits of fixed wages versus flexible wages. Although in both cases the same factors—supply and demand elasticities, marginal propensity to save—are effective, expectational coordination is often more successful with flexible wages.

Suggested Citation

  • Roger Guesnerie, 2001. "Short-Run Expectational Coordination: Fixed Versus Flexible Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 1115-1147.
    • Handle: RePEc:oup:qjecon:v:116:y:2001:i:3:p:1115-1147.
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    File URL: http://hdl.handle.net/10.1162/00335530152466322
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    Cited by:

    1. Azam, Jean-Paul, 2006. "How to Curb "High Quality" Terrorism?," IDEI Working Papers 418, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Hector Calvo-Pardo, 2009. "Are the antiglobalists right? Gains-from-trade without a Walrasian auctioneer," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 561-592, March.
    3. Roger Guesnerie, 2009. "Macroeconomic and Monetary Policies from the Eductive Viewpoint," Central Banking, Analysis, and Economic Policies Book Series, in: Klaus Schmidt-Hebbel & Carl E. Walsh & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.),Monetary Policy under Uncertainty and Learning, edition 1, volume 13, chapter 6, pages 171-202, Central Bank of Chile.
    4. Gaballo, Gaetano, 2013. "Eductive learning and the rationalizability of oligopoly games," Economics Letters, Elsevier, vol. 120(3), pages 401-404.
    5. Roger Guesnerie, 2006. "General Equilibrium, Co-ordination and Multiplicity on Spot Markets," Chapters, in: Richard Arena & Agnès Festré (ed.), Knowledge, Beliefs and Economics, chapter 4, Edward Elgar Publishing.
    6. Calvo Pardo, H., 2007. "Are the antiglobalists right? Gains-from-trade without a walrasian acutioneer," Discussion Paper Series In Economics And Econometrics 0712, Economics Division, School of Social Sciences, University of Southampton.
    7. Calvo Pardo, H., 2007. "Are the antiglobalists right? Gains-from-trade without a walrasian acutioneer," Discussion Paper Series In Economics And Econometrics 712, Economics Division, School of Social Sciences, University of Southampton.

    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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