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Equilibrium selection in global games with strategic complementarities

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  • Frankel, David M.
  • Morris, Stephen
  • Pauzner, Ady

Abstract

We study games with strategic complementarities, arbitrary numbers of players and actions, and slightly noisy payoff signals. We prove limit uniqueness: as the signal noise vanishes, the game has a unique strategy profile that survives iterative dominance. This generalizes a result of Carlsson and van Damme (1993) for two player, two action games. Te surviving profile, however, may depend on fine details of the structure of the noise. We provide sufficient conditions on payoffs for there to be noise-independent selection.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 108 (2003)
Issue (Month): 1 (January)
Pages: 1-44

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Handle: RePEc:eee:jetheo:v:108:y:2003:i:1:p:1-44

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Web page: http://www.elsevier.com/locate/inca/622869

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  1. Stephen Morris & Hyun S Shin, 2001. "Global Games: Theory and Applications," Levine's Working Paper Archive 122247000000001080, David K. Levine.
  2. Carlsson, H. & Damme, E.E.C. van, 1991. "Equilibrium selection in stag hunt games," Discussion Paper 1991-70, Tilburg University, Center for Economic Research.
  3. Atsushi Kajii & Stephen Morris, 1997. "The Robustness of Equilibria to Incomplete Information," Econometrica, Econometric Society, vol. 65(6), pages 1283-1310, November.
  4. Van Damme, E., 1991. "Equilibrium Selection in 2 x 2 Games," Papers 9108, Tilburg - Center for Economic Research.
  5. Morris, Stephen & Shin, Hyun Song, 1997. "Unique Equilibrium in a Model of Self-fulfilling Currency Attacks," CEPR Discussion Papers 1687, C.E.P.R. Discussion Papers.
  6. Stephen Morris & Hyun Song Shin, 1999. "Coordination Risk and the Price of Debt," Cowles Foundation Discussion Papers 1241R, Cowles Foundation for Research in Economics, Yale University, revised Feb 2002.
  7. Frankel, David M. & Pauzner, Ady, 2000. "Resolving Indeterminacy in Dynamic Settings: The Role of Shocks," Staff General Research Papers 11924, Iowa State University, Department of Economics.
  8. Hyun Song Shin & Giancarlo Corsetti & Amil Dasgupta & Stephen Morris, 2001. "Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders," FMG Discussion Papers dp372, Financial Markets Group.
  9. Stephen Morris & Takashi Ui, 2003. "Generalized Potentials and Robust Sets of Equilibria," Cowles Foundation Discussion Papers 1394, Cowles Foundation for Research in Economics, Yale University.
  10. S. Morris & R. Rob & H. Shin, 2010. "p-dominance and Belief Potential," Levine's Working Paper Archive 505, David K. Levine.
  11. Akihiko Matsui & Kiminori Matsuyama, 1990. "An Approach to Equilibrium Selection," Discussion Papers 970, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
  13. Hans Carlsson & Eric van Damme, 1993. "Global Games and Equilibrium Selection," Levine's Working Paper Archive 122247000000001088, David K. Levine.
  14. Ui, Takashi, 2001. "Robust Equilibria of Potential Games," Econometrica, Econometric Society, vol. 69(5), pages 1373-80, September.
  15. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  16. Rubinstein, Ariel, 1989. "The Electronic Mail Game: Strategic Behavior under "Almost Common Knowledge."," American Economic Review, American Economic Association, vol. 79(3), pages 385-91, June.
  17. Athey, S., 1997. "Sigle Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Working papers 97-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  18. Burdzy, Krzysztof & Frankel, David M & Pauzner, Ady, 2001. "Fast Equilibrium Selection by Rational Players Living in a Changing World," Econometrica, Econometric Society, vol. 69(1), pages 163-89, January.
  19. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
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