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Observing Actions in Global Games

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  • Dominik Grafenhofer
  • Wolfgang Kuhle

Abstract

We study Bayesian coordination games where agents receive noisy private information over the game's payoffs, and over each others' actions. If private information over actions is of low quality, equilibrium uniqueness obtains in a manner similar to a global games setting. On the contrary, if private information over actions (and thus over the game's payoff coefficient) is precise, agents can coordinate on multiple equilibria. We argue that our results apply to phenomena such as bank-runs, currency crises, recessions, or riots and revolutions, where agents monitor each other closely.

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  • Dominik Grafenhofer & Wolfgang Kuhle, 2021. "Observing Actions in Global Games," Papers 2111.10554, arXiv.org.
    • Handle: RePEc:arx:papers:2111.10554
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