1988/08/01 by Russell Cooper, Andrew John · 4 citations
Economics, Econometrics and Finance · #Economic theories and models #Economic Theory and Policy #Economic Theory and Institutions #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
paper · doi:10.2307/1885539
openalex publication_date 1988/08/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
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.