Coordinating Coordination Failures in Keynesian Models
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.
Cooper, Russell and Andrew, John, "Coordinating Coordination Failures in Keynesian Models" (1985). Cowles Foundation Discussion Papers. 986.