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Monotone methods for equilibrium selection under perfect foresight dynamics

  • Oyama, Daisuke

    ()

    (Graduate School of Economics, Hitotsubashi University)

  • Takahashi, Satoru

    ()

    (Department of Economics, Princeton University)

  • Hofbauer, Josef

    ()

    (Department of Mathematics, University of Vienna)

This paper studies a dynamic adjustment process in a large society of forward-looking agents where payoffs are given by a normal form supermodular game. The stationary states of the dynamics correspond to the Nash equilibria of the stage game. It is shown that if the stage game has a monotone potential maximizer, then the corresponding stationary state is uniquely linearly absorbing and globally accessible for any small degree of friction. A simple example of a unanimity game with three players is provided where there are multiple globally accessible states for a small friction.

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Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 3 (2008)
Issue (Month): 2 (June)
Pages:

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Handle: RePEc:the:publsh:194
Contact details of provider: Web page: http://econtheory.org

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