Knightian Intransparency of Central Bank and Labor Union∗
نویسندگان
چکیده
We analyze a simple strategic model of interaction between central bank and labor union. We assume that the intransparency of the central bank (labor union) induces Knightian uncertainty faced by the labor union (central bank). Knightian uncertainty means that decision makers are unable to make exact probability judgements. It is modelled by Choquet Expected Utility Theory and its recent application to strategic games. We derive clear-cut results on the comparative statics of inflation, wages and unemployment with respect to the “degree of intransparency.” Moreover, we analyze the strategic use of Knightian intransparency. JEL-Classifications: C72, D80, D81, E24, E31, E42, E50, E52.
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