Note on the optimality of unemployment equilibria (Q793632)

It is shown that in an economy with rigid prices there is a set of unemployment equilibria, i.e. equilibria for which the quantity rationing affects the supplies only. Then it is shown that under certain conditions each equilibrium in which there is rationing on all markets is dominated by an equilibrium in which at least one commodity is not rationed. On the other hand, if the conditions are not satisfied it may be possible that there exists an undominated equilibrium with rationing on all markets.