We show that equilibrium involuntary unemployment emerges in a multi-stage game model where all market power resides … returns there exists a continuum of subgame perfect equilibria involving unemployment. A firm does not undercut the … employment equilibria may also exist, but only the involuntary unemployment equilibria are robust to decreasing returns. …

modern labour market literature NAIRU is defined as the rate of unemployment at which inflation stabilizes in the absence of … any wage-price surprises. Conventional thinking about the equilibrium unemployment rate assumes that in the long run NAIRU …-mechanisms which could lead to permanent shifts of equilibrium unemployment over time, implying that an unique long run NAIRU may not …