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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. 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.
  2. 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.
  3. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  4. 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.
  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. Akihiko Matsui & Kiminori Matsuyama, 1990. "An Approach to Equilibrium Selection," Discussion Papers 970, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Atsushi Kajii & Stephen Morris, 1997. "The Robustness of Equilibria to Incomplete Information," Econometrica, Econometric Society, vol. 65(6), pages 1283-1310, November.
  8. 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.
  9. 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.
  10. 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.
  11. 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).
  12. Carlsson, H. & Damme, E.E.C. van, 1990. "Global games and equilibrium selection," Discussion Paper 1990-52, Tilburg University, Center for Economic Research.
  13. Carlsson, H. & Damme, E.E.C. van, 1991. "Equilibrium selection in stag hunt games," Discussion Paper 1991-70, Tilburg University, Center for Economic Research.
  14. Stephen Morris & Takashi Ui, 2003. "Generalized Potentials and Robust Sets of Equilibria," Levine's Working Paper Archive 506439000000000325, David K. Levine.
  15. 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.
  16. Ui, Takashi, 2001. "Robust Equilibria of Potential Games," Econometrica, Econometric Society, vol. 69(5), pages 1373-80, September.
  17. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275R, Cowles Foundation for Research in Economics, Yale University, revised Aug 2001.
  18. Morris, Stephen & Rob, Rafael & Shin, Hyun Song, 1995. "Dominance and Belief Potential," Econometrica, Econometric Society, vol. 63(1), pages 145-57, January.
  19. Van Damme, E., 1991. "Equilibrium Selection in 2 x 2 Games," Papers 9108, Tilburg - Center for Economic Research.
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