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From sets of equilibria to structures of interaction underlying binary games of strategic complements

  • Tomas Rodriguez Barraquer

Consider a setting in which agents can each take one of two ordered actions and in which the incentive of any given agent to take the high action is positively reinforced by the number of other agents that take it. Furthermore, assume that we don't know any other details about the game being played. What can we say about the details of the structure of the interaction between actions and incentives when we observe a set or a subset of all possible equilibria? In this paper we study 3 nested classes of games: (a) binary games of strategic complements; (b) games in (a) that admit a network representation: and (c) games in (b) in which the network is complete. Our main results are the following: It has long been established in the literature that the set of pure strategy Nash equilibria of any binary game of strategic complements among a set N of agents can be seen as a lattice on the set of all subsets of N under the partial order defined by the set inclusion relation. If the game happens to be strict in the sense that agents are never indifferent among outcomes (games in (a)), then the resulting lattice of equilibria satisfies a straightforward sparseness condition. (1) We show that, in fact, the games in (a) express all such lattices. (2) We characterize the collection of subsets of N that can be weakly expressed as the set of equilibria of some game of thresholds (games in (b)). (3) We characterize the collection of subsets of N that can be weakly expressed as the set of equilibria of some game of thresholds on the complete graph (games in (c)).

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Paper provided by The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem in its series Discussion Paper Series with number dp655.

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Length: 25 pages
Date of creation: Dec 2013
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Handle: RePEc:huj:dispap:dp655
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