Acemoglu, Daron (1992) Incomplete information bargaining and business cycles. CEP discussion paper, 60. Centre for Economic Performance, London School of Economics and Political Science, London, UK.Full text not available from this repository.
This paper presents a one-sided incomplete (asymmetric) information bargaining game in a dynamic general equilibrium framework. The model predicts business cycle movements in the economy with persistence mechanism arising from asymmetric information and search. The employment level is procyclical without the help of unusually high values of intertemporal elasticity of substitution, the real wage is procyclical but rigid. In addition, quits are procyclical and lay-offs countercyclical. Even if relevant information is revealed by the aggregate price level, the qualitative properties of the model do not change. The paper also discusses the efficiency issue. Firstly, contracts are shown to be more efficient than bargaining. Secondly, the decentralised equilibrium does not exploit the informational externalities that exist and the resulting sequence of equilibria are not only first-best inefficient but also second best inefficient.
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||© 1992 Daron Acemoglu|
|Library of Congress subject classification:||H Social Sciences > HD Industries. Land use. Labor|
|Sets:||Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
|Date Deposited:||21 Aug 2008 10:43|
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