Research Reports from the Department of Operations
Document Type
Report
Publication Date
7-1-1965
Abstract
The major purpose of this paper is to develop an aggregate model of interdependence of the labor, money, and product markets. As is well-known, this interdependence is due to the joint and mutual influence of the prices established in these markets. One approach is to restrict the analysis to the interactions among the observable outcomes (prices) of these markets. From a statistical viewpoint, this analysis can be performed, for example, by means of a suitable Markov model. A pure mathematical analysis can be made by applying the dynamical models due to Samuelson, Arrow, and Arrow-Enthoven. The common limitation of this latter approach (with the exception of Arrow-Enthoven) is that attention is focused only on the gross transfer characteristics of the dynamical system. However, in order to analyze the latent (that is, not directly observable) mechanism, there is unquestionably a need for behavioral assumptions. This is the approach employed in building a class of models presented below. These models have been constructed primarily with an eye to an extensive computer simulation under alternative hypotheses. We have herewith developed an aggregate model showing interdependence of the labor, money, and product markets due to the joint and mutual influence of prices established in these markets. The dominant factors in these inter-related markets are the anticipations of product price, wage rate, and rate of return on investment and the individual attitudes towards risk in capital expansion and operation. We have also developed the dynamic theory for deviations from equilibrium in terms of an excitation matrix, which determines the dynamic trend toward equilibrium.
Keywords
Operations research, Equilibrium (Economics), Labor supply--Economic aspects, Wage-price policy, Markov processes, Prices--Mathematical models, Economics--Psychological aspects
Publication Title
Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University
Issue
Technical memorandum no. 38
Rights
This work is in the public domain and may be freely downloaded for personal or academic use
Recommended Citation
Symonds, Gifford H. and Sengupta, S. Sankar, "A Behavioral Model of Labor Supply as Related to Wage-Price-Interest Movements" (1965). Research Reports from the Department of Operations. 57.
https://commons.case.edu/wsom-ops-reports/57