COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 745R

"Coordinating Coordination Failures in Keynesian Models"

Russell Cooper and John Andrew

April 1985
Revised July 1985

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.

JEL Classification: 023

Keywords: Coordination, multipliers, strategic complementarity, Keynesian