Imperfect Competition, General Equilibrium and Unemployment

CESifo Working Paper Series No. 224

29 Pages Posted: 16 Jun 2001

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Achim Schniewind

University of Heidelberg - Alfred Weber Institute for Economics

Date Written: December 1999

Abstract

We analyze whether different learning abilities of firms with respect to general equilibrium effects lead to different levels of unemployment. We consider a general equilibrium model where firms in one sector compete a la Cournot and a real wage rigidity leads to unemployment. If firms consider only partial equilibrium effects when choosing quantities, the observation of general equilibrium feedback effects will lead to repeated quantity adjustments until a steady state is reached. When labor is immobile across industries, unempolyment in the steady state is lower than when all general equilibrium effects are incorporated at once. The opposite result is true if labor is mobile.

Keywords: Product markets, Cournot competition, learning of general equilibrium effects, unemployment

JEL Classification: D58, E24, J60, L13

Suggested Citation

Gersbach, Hans and Schniewind, Achim, Imperfect Competition, General Equilibrium and Unemployment (December 1999). CESifo Working Paper Series No. 224. Available at SSRN: https://ssrn.com/abstract=269457

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
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+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
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Germany

CESifo (Center for Economic Studies and Ifo Institute)

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Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Achim Schniewind

University of Heidelberg - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

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