Imperfect Competition, multiple equilibria and unemployment policy

This paper takes a simple imperfectly competitive macro model with increasing returns and shows how it can lead to nonexistence or multiplicity of equilibria. The consequences for government policy toward unemployment are explored and shown to be very different from the traditional model. It is argued that a multiple equilibrium model is an attractive possible explanation of the behavior of U.K. unemployment in the 1980s. Copyright 1990 by Royal Economic Society.