This paper presents a model of co-ordination failures based on market power and local oligopoly. The economy exhibits a multiplicity of Pareto-ranked equilibria. The introduction of uncertainty generates an endogenous equilibrium selection process, due to a strategic use of information by firms. The economy is more likely to settle on some equilibria than on others. We argue that a full understanding of these robustness criteria is needed before any policy which is intended to help co-ordinate the level of activity to a Pareto dominant outcome can be successfully implemented.
Scaramozzino, P., Vulkan, N. (2004). Uncertainty and endogenous selection of economic equilibria. METROECONOMICA, 55(1), 22-40 [10.1111/j.0026-1386.2004.00180.x].
Uncertainty and endogenous selection of economic equilibria
SCARAMOZZINO, PASQUALE;
2004-01-01
Abstract
This paper presents a model of co-ordination failures based on market power and local oligopoly. The economy exhibits a multiplicity of Pareto-ranked equilibria. The introduction of uncertainty generates an endogenous equilibrium selection process, due to a strategic use of information by firms. The economy is more likely to settle on some equilibria than on others. We argue that a full understanding of these robustness criteria is needed before any policy which is intended to help co-ordinate the level of activity to a Pareto dominant outcome can be successfully implemented.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.