On payoff heterogeneity in games with strategic complementarities
AbstractPayoff heterogeneity weakens positive feedback in binary choice models in two ways. First, heterogeneity drives individuals to corners where they are unaffected by strategic complementarities. Second, aggregate behaviour is smoother than individual behaviour when individuals are heterogeneous. However, this smoothing does not necessarily eliminate positive feedback or guarantee a unique equilibrium. In games with an unbounded, continuous choice space, heterogeneity may either weaken or strengthen positive feedback, depending on a simple convexity/concavity condition. We conclude that positive feedback phenomena derived in representative agent models will often be robust to heterogeneity.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 546.
Date of creation: Apr 2001
Date of revision: Feb 2002
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Heterogeneity; multiplicity; discrete choice; strategic complementarity; positive feedback;
Other versions of this item:
- Antonio Ciccone & James Costain, 2004. "On payoff heterogeneity in games with strategic complementarities," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 701-713, October.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- E00 - Macroeconomics and Monetary Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-05-16 (All new papers)
- NEP-DCM-2001-05-16 (Discrete Choice Models)
- NEP-GTH-2001-05-02 (Game Theory)
- NEP-MIC-2001-05-16 (Microeconomics)
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