The long-run equilibrium in the context of COVID-19 pandemic

Abstract

PurposeA serious problem in the pandemic days is that in this period many firms face difficulties with remaining on the market. It causes that the entrepreneurs do not undertake activities which could result in introducing innovations. In this context, the authors examine new mechanisms which lead competitive economy to the long-run equilibrium under the assumption that producers are change-averse.Design/methodology/approachThe results have the form of theorems with rigorous proofs and provide the ideas on the way of developing the economic policy in respect of firms in the pandemic days.FindingsAs a result, the authors justify that in some cases it is worth leading an economic sector or a whole economy to the long-run equilibrium state.Originality/valueThe authors show that there exists a mechanism in the sense of Hurwicz which transforms the economy into an economic system being in the long-run equilibrium as well as the authors determine optimal mechanisms, under the criterion of distance minimization, in some subsets of the mechanisms designed.