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Independence, Heterogeneity and Uniqueness in Interaction Games

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  • Robin Mason

    ()
    (University of Southampton)

  • Akos Valentinyi

    ()
    (University of Southampton)

Abstract

This paper shows that incomplete information and sufficient heterogeneity of players can ensure uniqueness in interaction games. In contrast to recent work on uniqueness in interaction games, we do not require strategic complementarity. There are two parts to the argument. First, if a player’s signal is sufficiently uninformative of the signals of its opponents (in the sense of the Fisher information of the signal), then the player’s best response to any strategy profile of its opponents is non-decreasing in its signal. Secondly, a contraction mapping argument shows that sufficient heterogeneity ensures that equilibrium is unique.

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Bibliographic Info

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0303.

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Length: 29 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:has:discpr:0303

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Keywords: Co-ordination; Interaction games; Heterogeneity; Unique equilibrium;

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References

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  1. Frankel, David M. & Burdzy, Krzysztof & Pauzner, Ady, 2001. "Fast Equilibrium Selection by Rational Players Living in a Changing World," Staff General Research Papers 11923, Iowa State University, Department of Economics.
  2. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, Econometric Society, vol. 62(1), pages 157-80, January.
  3. repec:cdl:agrebk:5280 is not listed on IDEAS
  4. Stephen Morris, . "Interaction Games: A Unified Analysis of Incomplete Information, Local Interaction and Random Matching," Penn CARESS Working Papers, Penn Economics Department 1879bf5487d743edef7f32bb2, Penn Economics Department.
  5. Frankel, David M. & Morris, Stephen & Pauzner, Ady, 2003. "Equilibrium Selection in Global Games with Strategic Complementarities," Staff General Research Papers 11920, Iowa State University, Department of Economics.
  6. Hans Carlsson & Eric van Damme, 1993. "Global Games and Equilibrium Selection," Levine's Working Paper Archive 122247000000001088, David K. Levine.
  7. Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 617-50, May.
  8. Herrendorf, Berthold & Valentinyi, Akos & Waldmann, Robert, 2000. "Ruling Out Multiplicity and Indeterminacy: The Role of Heterogeneity," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(2), pages 295-307, April.
  9. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(3), pages 401-19, June.
  10. Athey, Susan, 2001. "Single Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Econometrica, Econometric Society, Econometric Society, vol. 69(4), pages 861-89, July.
  11. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 651-67, May.
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