The name is absent



Figure 3. The Shape of Equilibrium Responses


By exactly the same argument, for every Ah there is a unique equilibrium response (Am, sm).
We now proceed to describing the overall equilibrium. This analysis depends on the following
useful fact:

OBSERVATION 1. If the equilibrium response Ah is positive, it increases with Am as long as Ah exceeds
Am, and declines as Am increases whenever the opposite inequality holds.9

Proving this observation is a simple exercise. By virtue of (3), all we need to do is study
whether
C increases or decreases with Am . For instance, if C increases in Am, then by the earlier
argument,
Ah increases.10 Using a standard complementarity argument, it is easy to see that
C increases with Am if the derivative p1 (Ah , Am) increases with Am, and decreases otherwise.

Recalling (1), we see that

p1(Ah,Am) =


ψ(Λm)ψ'(Ah)
[ψ(Am) + ψ(Ah)]2,

so that


∂p1(Ah,Am)
∂Am


ψ' (Λm)ψ'(Ah)
[ψ(Am) + ψ(Ah)]3


[ψ(Ah) - ψ(Am)],


so that the derivative increases or decreases with Am depending on whether Ah is larger or
smaller than
Am .

Observation 1 tightly pins down the shape of the equilibrium response function. Either it
stays flat at 0 throughout — the uninteresting case — or it is “hump-shaped”, initially rising

9The zones of increase and decrease will be punctuated by flats corresponding to the jump segments in s; these flats
will be small if the wage rate differential across neighboring types are small. In any case, these have no effect on the
results.

10It will stay constant with the entire increase transferred to sh in case we are at a jump segment; see previous
footnote.



More intriguing information

1. Input-Output Analysis, Linear Programming and Modified Multipliers
2. The Impact of EU Accession in Romania: An Analysis of Regional Development Policy Effects by a Multiregional I-O Model
3. National urban policy responses in the European Union: Towards a European urban policy?
4. Managing Human Resources in Higher Education: The Implications of a Diversifying Workforce
5. The Role of Land Retirement Programs for Management of Water Resources
6. The name is absent
7. ISO 9000 -- A MARKETING TOOL FOR U.S. AGRIBUSINESS
8. How do investors' expectations drive asset prices?
9. The Triangular Relationship between the Commission, NRAs and National Courts Revisited
10. Running head: CHILDREN'S ATTRIBUTIONS OF BELIEFS