Coordinating Coordination Failures in Keynesian Models | Zendy

Russell Cooper | Zendy; Andrew John | Zendy

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Coordinating Coordination Failures in Keynesian Models

Author(s) -

Russell Cooper,

Andrew John

Publication year - 1988

Publication title -

the quarterly journal of economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 34.573

H-Index - 259

eISSN - 1531-4650

pISSN - 0033-5533

DOI - 10.2307/1885539

Subject(s) - economics , coordination failure , pareto optimal , microeconomics , multiplier (economics) , matching (statistics) , commodity , pareto principle , production (economics) , stochastic game , computer science , macroeconomics , multi objective optimization , operations management , market economy , statistics , mathematics , machine learning

This paper focuses on the importance of strategic complementarities in agents' payoff functions as a basis for macroeconomic coordination failures. Strategic complementarities arise when the optimal strategy of an agent depends positively upon the strategies of the other agents. We first analyze an abstract game and find that multiple equilibria and a multiplier process may arise when strategic complementarities are present. Often these equilibria can be Pareto ranked. We then place additional economic content on the analysis of this game by considering strategic complementarities arising from production functions, matching technologies, and commodity demand functions in a multisector, imperfectly competitive economy.

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