Abstract
This paper analyzes fiscal policy and wage determination as a Stackelberg game between a government and a single trade union. It is assumed that the players believe in different economic theories, which implies that their ideas about the probable effects of fiscal policy measures and wage claims differ.
The difference between the players’ views is represented by differences in the parameter values of their model. Adaptations of the Stackelberg solution concept dependent on the information of the leader about the follower’s model are introduced. Assuming there is a “true” model, numerical simulations are carried out in order to investigate the implications of the assumption of conflicting views for the strategies that come about as well as for macroeconomic performance and the values of the welfare loss functions of the players. It is concluded, that there may be cases in which the follower has an incentive to keep the leader unaware of the fact that their models are different.
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© 1992 Springer Science+Business Media Dordrecht
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Prast, H.M. (1992). Information in a Stackelberg Game between Two Players Holding Different Theoretical Views: Solution Concepts and an Illustration. In: Amman, H.M., Belsley, D.A., Pau, L.F. (eds) Computational Economics and Econometrics. Advanced Studies in Theoretical and Applied Econometrics, vol 22. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-3162-9_9
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DOI: https://doi.org/10.1007/978-94-011-3162-9_9
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-010-5394-5
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