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.
Vulkan, N., Scaramozzino, P. (2003). Uncertainty and endogenous selection of economic equilibria [Altro].
Uncertainty and endogenous selection of economic equilibria
SCARAMOZZINO, PASQUALE
2003-03-01
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.File | Dimensione | Formato | |
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SSRN-id386281.pdf
accesso aperto
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297.61 kB
Formato
Adobe PDF
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297.61 kB | Adobe PDF | Visualizza/Apri |
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