ENDOGENOUSLY DETERMINED PRICE RIGIDITIES

There exists an extensive literature about economies with price rigidi ties, where some constraints on the set of admissible price systems ar e exogenously given. In this paper a general equilibrium model extende d by a political system is described where the price rigidities are en dogenously chosen by political candidates. Sufficient conditions for t he existence of a mixed strategy and a pure strategy equilibrium are g iven. Finally an example is discussed, where in equilibrium both polit ical candidates propose price rigidities excluding the Walrasian equil ibrium price system.