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Macroeconomic coordination failure under oligempory

Author

Listed:
  • Paul Madden

    (School of Economic Studies, University of Manchester, Manchester M13 9PL, UK)

  • Esma Gaygisiz

    (Department of Economics, Middle East Technical University, Ankara, TURKEY)

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.

Suggested Citation

  • Paul Madden & Esma Gaygisiz, 2002. "Macroeconomic coordination failure under oligempory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(1), pages 93-112.
    • Handle: RePEc:spr:joecth:v:20:y:2002:i:1:p:93-112
    Note: Received: February 28, 2000; revised version: March 16, 2001
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    Citations

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    Cited by:

    1. Kaas, Leo & Madden, Paul, 2005. "Imperfectly competitive cycles with Keynesian and Walrasian features," European Economic Review, Elsevier, vol. 49(4), pages 861-886, May.
    2. Partha Sen, 2009. "Fixed Costs, The Balanced Budget Multiplier And Welfare," The Japanese Economic Review, Japanese Economic Association, vol. 60(3), pages 395-404, September.

    More about this item

    Keywords

    Oligempory; Coordination failure; Sunspot equilibria.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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