A model with coordination failures has
A) agents that do not act rationally.
B) multiple equilibria.
C) a government that is too large.
D) a tax rate that is too high.

Question

Quizplus · Accepted Answer

In a model with coordination failures, agents may have multiple equilibria where their actions depend on what they expect others to do. This results in a situation where all agents might prefer one outcome but end up with a different one due to a lack of coordination. It does not necessarily mean that agents are not rational, or that the government or tax rate is a factor.

A Model with Coordination Failures Has