Introduction

Abstract

Recent literature on disequilibrium models can be identified with four basic types of model (Quandt, 1982). The first type is represented by macroeconomic models in which prices and wages are rigid with the result that Walrasian demands and supplies are generally unattainable by agents. This leads to a reformulation of the respective optimization problems of consumers and producers which, in turn, emerges in the theory of “effective demand and supply”. The second type of model deals with the microeconomic foundation of effective demand theory within a general equilibrium framework. Whereas the first two types of model do not ask in detail why (output and input) prices might be rigid in particular circumstances, the third type — labelled as implicit contracting models — investigates these questions predominantly in relation to the labor market, showing that the possibility of involuntary unemployment can be derived from microeconomic reasoning that takes into account institutional details, transaction costs of labor, and recruiting costs for firms. Finally, econometric disequilibrium models are considered as a fourth type, whose basic form is the canonical diequilibrium model. The latter consists of a demand and a supply equation for a single market, both including error terms, and a minimum condition which states that the realized (or observed) quantity is the minimum of the quantity either demanded or supplied.