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Equilibrium Selection in Global Games with Strategic Complementarities

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Author Info

  • David M. Frankel

    (Tel Aviv University)

  • Stephen Morris

    (Cowles Foundation)

  • Ady Pauzner

    (Tel Aviv University)

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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File URL: http://cowles.econ.yale.edu/P/cd/d13a/d1336.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1336.

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Length: 62 pages
Date of creation: Nov 2001
Date of revision:
Publication status: Published in Journal of Economic Theory (2003), 108(1): 1-44
Handle: RePEc:cwl:cwldpp:1336

Note: CFP 1075.
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Related research

Keywords: Equilibrium Selection; Global Games; Strategic Complementarities; Supermodular Games;

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References

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  1. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September.
  2. Athey, Susan, 2001. "Single Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Econometrica, Econometric Society, vol. 69(4), pages 861-89, July.
  3. Matsui Akihiko & Matsuyama Kiminori, 1995. "An Approach to Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 65(2), pages 415-434, April.
  4. S. Morris & R. Rob & H. Shin, 2010. "p-dominance and Belief Potential," Levine's Working Paper Archive 505, David K. Levine.
  5. 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.
  6. Corsetti, Giancarlo & Dasgupta, Amil & Morris, Stephen & Shin, Hyun Song, 2000. "Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders," CEPR Discussion Papers 2610, C.E.P.R. Discussion Papers.
  7. Carlsson, H. & Van Dame, E., 1991. "Equilibrium Selection in Stag Hunt Games," Papers 9170, Tilburg - Center for Economic Research.
  8. Stephen Morris & Takashi Ui, 2003. "Generalized Potentials and Robust Sets of Equilibria," Levine's Working Paper Archive 506439000000000325, David K. Levine.
  9. Stephen Morris & Hyun Song Shin, 1999. "Coordination Risk and the Price of Debt," Cowles Foundation Discussion Papers 1241, Cowles Foundation for Research in Economics, Yale University.
  10. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275, Cowles Foundation for Research in Economics, Yale University.
  11. Atsushi Kajii & Stephen Morris, . "The Robustness of Equilibria to Incomplete Information," Penn CARESS Working Papers ed504c985fc375cbe719b3f60, Penn Economics Department.
  12. 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.
  13. 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.
  14. Morris, S & Song Shin, H, 1996. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," Economics Papers 126, Economics Group, Nuffield College, University of Oxford.
  15. Van Damme, E., 1991. "Equilibrium Selection in 2 x 2 Games," Papers 9108, Tilburg - Center for Economic Research.
  16. Ui, Takashi, 2001. "Robust Equilibria of Potential Games," Econometrica, Econometric Society, vol. 69(5), pages 1373-80, September.
  17. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  18. 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.
  19. Vives, X., 1988. "Nash Equilibrium With Strategic Complementarities," UFAE and IAE Working Papers 107-88, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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