Coordinating Coordination Failures in Keynesian Models
AbstractThis 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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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 745R.
Length: 37 pages
Date of creation: Apr 1985
Date of revision: Jul 1985
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
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