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Global Games With Strategic Substitutes

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  • Rodrigo Harrison
  • Pedro Jara‐Moroni

Abstract

We study global games with strategic substitutes. Specifically, for a class of binary‐action, N‐player games with strategic substitutes, we prove that under payoff asymmetry, as incomplete information vanishes, the global games approach selects a unique equilibrium. We characterize this equilibrium profile ; players employ switching strategies at different cutoff signals, the order of which is directly determined by payoff asymmetry. We provide examples that illustrate our result and its connection with dominance solvability. We extend the global game literature, which has thus far been developed for games with strategic complementarities, to new applications in industrial organization, collective action problems, finance, etc .

Suggested Citation

  • Rodrigo Harrison & Pedro Jara‐Moroni, 2021. "Global Games With Strategic Substitutes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 141-173, February.
    • Handle: RePEc:wly:iecrev:v:62:y:2021:i:1:p:141-173
    DOI: 10.1111/iere.12481
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    References listed on IDEAS

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    7. Frankel, David M., 2012. "Recurrent crises in global games," Journal of Mathematical Economics, Elsevier, vol. 48(5), pages 309-321.
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