Continua of underemployment equilibria reflecting coordination failures, also at Walrasian prices (Q1602930)

The paper considers a general equilibrium model with production and the combination of fixed/flexible prices. The commodities are split into two a priori given groups, labeled I and II. The prices of commodities in group I are assumed to be completely flexible, while the prices of commodities in group II on the contrary are fixed. It is considered that each household and each firm has a fixed predetermined market share, which allows for several interesting special cases like uniform or proportional rationing systems. It is shown that even at Walrasian prices a continuum of equilibrium results, among which an equilibrium with approximately no trade and a Walrasian equilibrium. Some properties of the set of equilibria are analysed.