Strategic market interactions lead to underemployment and economic inequality.
The article explores how strategic interactions in a mixed market can lead to underemployment. It uses a model with two sectors and flexible prices and wages to show that as the number of strategic traders increases, underemployment matches competitive levels. The study also compares the welfare of traders in different equilibria and considers the impact of a tax on strategic supplies. Overall, the findings suggest that strategic behavior can affect market outcomes and welfare in mixed markets.