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Monotone Comparative Statics in Games with both Strategic Complements and Strategic Substitutes

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Author Info

  • Andrew Monaco

    (Department of Economics, University of Kansas)

  • Tarun Sabarwal

    (Department of Economics, University of Kansas)

Abstract

This paper analyzes games with both strategic substitutes and strategic complements. Such games may behave differently from either games with strategic complements or games with strategic substitutes. In such games, equilibria do not decrease as the parameter increases. Moreover, natural conditions are presented to guarantee that an increase in the parameter leads to an increase in the equilibrium: in other words, conditions to guarantee monotone comparative statics. These conditions are based on intuitive tradeoffs between direct parameter effects and indirect strategic effects. These conditions are needed only for players with strategic substitutes; no conditions are imposed on players with strategic complements. Several examples highlight the results.

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Bibliographic Info

Paper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 201236.

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Length: 30 pages
Date of creation: Aug 2012
Date of revision: Aug 2012
Handle: RePEc:kan:wpaper:201236

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Keywords: Lattice games; strategic complements; strategic substitutes; equilibrium set; monotone comparative statics;

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  1. Villas-Boas, J. Miguel, 1997. "Comparative Statics of Fixed Points," Journal of Economic Theory, Elsevier, vol. 73(1), pages 183-198, March.
  2. Tombak, Mihkel M., 2006. "Strategic asymmetry," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 339-350, November.
  3. Federico Echenique, 2002. "Comparative Statics by Adaptive Dynamics and the Correspondence Principle," Econometrica, Econometric Society, vol. 70(2), pages 833-844, March.
  4. Alexander Zimper, 2005. "A fixed point characterization of the dominancesolvability of lattice games with strategic substitutes," Working Papers 32, Economic Research Southern Africa.
  5. Acemoglu, Daron & Jensen, Martin Kaae, 2013. "Aggregate comparative statics," Games and Economic Behavior, Elsevier, vol. 81(C), pages 27-49.
  6. Roy, Sunanda & Sabarwal, T, 2008. "On the (Non)-Lattice Structure of Equilibrium Sets in Games with Strategic Substitutes," Staff General Research Papers 13103, Iowa State University, Department of Economics.
  7. John K.-H. Quah & Bruno Strulovici, 2009. "Comparative Statics, Informativeness, and the Interval Dominance Order," Econometrica, Econometric Society, vol. 77(6), pages 1949-1992, November.
  8. Martin Jensen, 2010. "Aggregative games and best-reply potentials," Economic Theory, Springer, vol. 43(1), pages 45-66, April.
  9. Amir, Rabah & Garcia, Filomena & Knauff, Malgorzata, 2010. "Symmetry-breaking in two-player games via strategic substitutes and diagonal nonconcavity: A synthesis," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1968-1986, September.
  10. John K.-H Quah, 2007. "The Comparative Statics of Constrained Optimization Problems," Econometrica, Econometric Society, vol. 75(2), pages 401-431, 03.
  11. Andrew Monaco & Tarun Sabarwal, 2010. "A non-robustness in the order structure of the equilibrium set in lattice games," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201004, University of Kansas, Department of Economics, revised Aug 2011.
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