Coordinating Coordination Failures in Keynesian Models

On Coordinating Coordination Failures

This paper examines whether a principal with limited knowledge of agents’ actions can use an income tax scheme to uniquely implement the Pareto optimal equilibrium in a coordination game (i.e. a game with multiple Pareto-ranked equilibria). We show that, in contrast to games with externalities but a unique equilibrium, implementation in coordination games fails generically unless the identity o...

Coordination Failures

Keynesian Models of Unemployment

Intermediate Macroeconomics: Keynesian Models

At the risk of some oversimplification, the leading alternatives to the neoclassical / real business cycle model for understanding short run fluctuations are Keynesian models. I phrase this in the plural because there are multiple different versions of the Keynesian model, which differ in terms of how the aggregate supply block of the economy is formulated. Whereas neoclassical models emphasize...

Equilibria with Coordination Failures

This paper extends the literature on equilibria with coordination failures to arbitrary convex sets of admissible prices. This makes it possible to address coordination failures for cases with price indexation or more general price linkages between commodities. We introduce a new equilibrium concept, called quantity constrained equilibrium (QCE), giving a unified treatment to all cases consider...