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Coordinating Coordination Failures in Keynesian Models

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  • Russell Cooper
  • John Andrew
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    Abstract

    This paper focuses on the importance of strategic complementarity in agents' payoff functions as a basis for macroeconomic coordination failures. We first analyze an abstract game and find that inefficient equilibria and a multiplier process may arise in the presence of strategic complementarities (essentially positively sloped reaction curves). We then place additional economic content on complementarities arising from production functions, matching technologies and commodity demand functions in a multi-sector economy.

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    File URL: http://cowles.econ.yale.edu/P/cd/d07a/d0745-r.pdf
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    Bibliographic Info

    Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 745R.

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    Length: 37 pages
    Date of creation: Apr 1985
    Date of revision: Jul 1985
    Handle: RePEc:cwl:cwldpp:745r

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    Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
    Phone: (203) 432-3702
    Fax: (203) 432-6167
    Web page: http://cowles.econ.yale.edu/
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    Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

    Related research

    Keywords: Coordination; multipliers; strategic complementarity; Keynesian;

    References

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    1. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Benassy Jean-pascal, 1974. "Neokeynesian disequilibrium theory in a monetary economy," CEPREMAP Working Papers (Couverture Orange) 7402, CEPREMAP.
    3. Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December.
    4. Hart, Oliver, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, MIT Press, vol. 97(1), pages 109-38, February.
    5. Bryant, John, 1983. "A Simple Rational Expectations Keynes-Type Model," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 525-28, August.
    6. Jeremy I. Bulow & John Geanakoplos & Paul D. Klemperer, 1983. "Multimarket Oligopoly," Cowles Foundation Discussion Papers 674, Cowles Foundation for Research in Economics, Yale University.
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    Citations

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    Cited by:
    1. Haltiwanger, John & Waldman, Michael, 1991. "Responders versus Non-responders: A New Perspective on Heterogeneity," Economic Journal, Royal Economic Society, vol. 101(408), pages 1085-1102, September.
    2. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
    3. Nordhaus, William & John, Andrew, 1986. "The share economy: A symposium," Journal of Comparative Economics, Elsevier, vol. 10(4), pages 414-415, December.
    4. Akram, Q. Farooq & Nymoen, Ragnar, 2006. "Econometric modelling of slack and tight labour markets," Economic Modelling, Elsevier, vol. 23(4), pages 579-596, July.
    5. Klundert, T.C.M.J. van de, 1987. "Coordination failure in an industrial society," Open Access publications from Tilburg University urn:nbn:nl:ui:12-4860199, Tilburg University.
    6. Russell Cooper, 1985. "Sharing Some Thoughts on Weitzman's The Share Economy," NBER Working Papers 1734, National Bureau of Economic Research, Inc.

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