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Strategic complementarity complicates both empirical analysis designed to detect discrimination and policy meant to alleviate it.
The setup features payoff externalities and strategic complementarity among players, who non-cooperatively determine their contributions.
This paper focuses on the importance of strategic complementarity in agents' payoff functions as a basis for macroeconomic coordination failures.
In this paper, we ask whether a small structural model with sticky prices and wages, embedding various modelling devices designed to increase the degree of strategic complementarity between price-setters, can fit postwar U.S. data.
We show that the induced strategic choice by shareholders of CEO contracts features strategic complementarity in the degree of RPE: if one firm designs a compensation package with more RPE, the optimal response of the rival firm's shareholders is to increase the level of RPE in the compensation of their own manager.
These games embody models that exhibit strategic complementarity, an important and empirically relevant class of economic models.
Similar(51)
Milgrom, Paul and John Roberts, "Rationalizability, Learning and Equilibrium in Games With Strategic Complementarities," Econometrica, 58, 1990, 1255-78.
The findings provide support of strategic complementarities; investments in monetary and fiscal institutions reinforce each other.
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).
Strategic complementarities induced by factor demand linkages significantly alter the transmission of shocks and amplify the loss of social welfare under optimal monetary policy, compared to what is observed in standard two-sector models.
The former focus on the case of strategic complementarities, while the latter study the case with strategic substitutabilities and characterise all equilibria of this game.
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