Imperfectly Competitive Factor Markets and Price Normalization

University of Aarhus, Dept. of Economics Working Paper 1996-5

Posted: 25 Apr 1998

See all articles by Bo Sandemann Rasmussen

Bo Sandemann Rasmussen

Aarhus University - Department of Economics and Business Economics

Date Written: Undated

Abstract

A two-sector general equilibrium model with imperfectly competitive labour markets is set up. Non-cooperative equilibria with wage setting at the sectoral level are shown to depend on the choice of price normalization rule even though all agents behave fully rationally. Hence, imposing rationality is not sufficient to deprive the choice of price normalization rule of its importance. It is argued that the importance of the choice of price normalization rule may follow from the strategic interaction of agents and not from imperfectness of competition per se, and some examples are provided.

JEL Classification: D50, J51

Suggested Citation

Rasmussen, Bo Sandemann, Imperfectly Competitive Factor Markets and Price Normalization (Undated). University of Aarhus, Dept. of Economics Working Paper 1996-5, Available at SSRN: https://ssrn.com/abstract=3259

Bo Sandemann Rasmussen (Contact Author)

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V
Denmark
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

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