Games with strategic complementarities can often be studied simply by using standard techniques,…

Games with strategic complementarities can often be studied simply by using standard techniques, although the theory of super modularity offers a more elegant and general method. Bulow et al. (1985) and Fudenberg and Tirole (1984) offer industrial-organization examples. This exercise develops a macroeconomic example. As Cooper and John (1988) argue, many models with “aggregate demand externalities,” “spillovers,” or “Keynesian effects” have a common structure. Consider a symmetric I-player game in which player i’s payoff is u(si, s-i), where si ≥0.

(d) Think of reasons why spillovers may be relevant. (Hint: Consider monopolistic competition, search, learning spillovers, and so on.)