Monopolistic Competition, Risk Aversion, and Equilibrium Recessions
在垄断竞争模型中引入企业风险规避行为，发现存在有限个可排序的均衡，其中低水平均衡因企业利润低而极度谨慎的雇佣决策得以维持。
This paper considers a model with monopolistic competition and multiple equilibria, rankable by output, employment, and the Pareto criterion. While papers in the literature assume a linear production technology and derive a continuum of equilibria, we assume a standard diminishing returns production function and find a finite set of equilibria. Our new feature is the assumption that firms behave in a risk-averse manner. A low-level equilibrium is sustainable because firms, at the low profits level associated with the equilibrium, become extremely cautious in their employment decisions.