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Imperfect competition has become one of the main ingredients of the so-called ‘New Keynesian economics’. Much recent work has emphasized Keynesian features of imperfectly competitive macroeconomic models, belonging either to the Cournotian tradition, as in Hart (1982), or to one of the monopolistic competition brands, corresponding to the Chamberlinian framework of Dixit and Stiglitz (1977) (Weitzman, 1985; Blanchard and Kiyotaki, 1987), or to Hotelling's spatial model (Weitzman, 1982). A somewhat paradoxical aspect of part of this literature is that it actually appears quite unkeynesian, not so much because Keynes himself paid little attention to imperfect competition, but essentially because some of its results, concerning in particular unemployment or the response to aggregate demand shocks, depend either on union power, or on small adjustment costs (‘menu costs’) and ‘nearly rational’ behaviour of price-setting agents and thus in a sense come back to ‘classical’ explanations, in terms of wage and price rigidities or frictional phenomena.
We do not want to deny the relevance of such explanations. We propose to explore in this chapter only some consequences of firms' monopoly power, in a context of full rationality, complete price flexibility, without adjustment costs and in the absence of exogenous shocks. Since we conform to the Keynesian priority given to the product market relatively to the labour market, and since it is the output market power that we want to emphasize, we shall (unrealistically) assume perfect competion in a homogeneous labour market.
La théorie de l’équilibre général walrasien possède un pouvoir prédictif, du moins tant que l’on veut bien s’en tenir à des environnements en information complète, en l’absence de pouvoirs de marché et où il est connaissance commune que les marchés doivent s’équilibrer. On examine ici les difficultés qui surviennent dès que sont pris en considération des pouvoirs de marché ou des informations privées.
A simple general equilibrium model of imperfect competition is introduced with special attention given to the labour market. An extended Cournot equilibrium is defined for any money wage taken as given by the producers. Under some assumptions involuntary unemployment may arise, that is unemployment whatever the given money wage. Specific examples are considered.
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