Equilibrium Involuntary Unemployment under Oligempory

Kaas, Leo and Madden, Paul (June 1999) Equilibrium Involuntary Unemployment under Oligempory. Former Series > Working Paper Series > IHS Economics Series 68


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Abstract: We show that equilibrium involuntary unemployment emerges in a multi-stage game model where all market power resides with firms, on both the labour and the output market. Firms decide wages, employment, output and prices, and under constant returns there exists a continuum of subgame perfect equilibria involving unemployment. A firm does not undercut the equilibrium wage since then high wage firms would attract its workers, thus forcing the low wage firm out of both markets. Full employment equilibria may also exist, but only the involuntary unemployment equilibria are robust to decreasing returns.;

Item Type: IHS Series
Keywords: 'Involuntary unemployment' 'Multi-stage game' 'Imperfect competition'
Classification Codes (e.g. JEL): D43, E24
Date Deposited: 26 Sep 2014 10:36
Last Modified: 27 Sep 2019 06:18
URI: https://irihs.ihs.ac.at/id/eprint/1175

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