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Characterising Equilibrium Selection in Global Games with Strategic Complementarities

Listed author(s):
  • Christian Basteck
  • Tijmen R. Daniëls
  • Frank Heinemann

Global games are widely used for equilibrium selection to predict behaviour in complete information games with strategic complementarities. We establish two results on the global game selection. First, we show that it is independent of the payoff functions of the global game embedding, though it may depend on the noise distribution. Second, we give a simple sufficient criterion for noise independence in many action games. A many action game may be noise independent if it can be suitably decomposed into smaller (say, binary action) games, for which there are simple criteria guaranteeing noise independence. We delineate the games where noise independence may be established by counting the number of players or actions. In addition, we give an elementary proof that robustness to incomplete information implies noise independence.

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File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2010-008.pdf
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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2010-008.

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Length: 36 pages
Date of creation: Jan 2010
Handle: RePEc:hum:wpaper:sfb649dp2010-008
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  8. Atsushi Kajii & Stephen Morris, "undated". ""The Robustness of Equilibria to Incomplete Information*''," CARESS Working Papres 95-18, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  9. Frankel, David M. & Morris, Stephen & Pauzner, Ady, 2003. "Equilibrium Selection in Global Games with Strategic Complementarities," Staff General Research Papers Archive 11920, Iowa State University, Department of Economics.
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  11. Oyama, Daisuke & Takahashi, Satoru, 2011. "On the relationship between robustness to incomplete information and noise-independent selection in global games," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 683-688.
  12. Cukierman, Alex & Goldstein, Itay & Spiegel, Yossi, 2003. "The Choice of Exchange Rate Regime and Speculative Attacks," CEPR Discussion Papers 3714, C.E.P.R. Discussion Papers.
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  14. Basteck, Christian & Daniëls, Tijmen R. & Heinemann, Frank, 2013. "Characterising equilibrium selection in global games with strategic complementarities," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2620-2637.
  15. J. B. Van Huyck & R. C. Battalio & R. O. Beil, 2010. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 661465000000000393, David K. Levine.
  16. Giancarlo Corsetti & Amil Dasgupta & Stephen Morris & Hyun Song Shin, 2004. "Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 87-113.
  17. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica, Econometric Society, vol. 72(5), pages 1583-1599, 09.
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  20. Itay Goldstein, 2005. "Strategic Complementarities and the Twin Crises," Economic Journal, Royal Economic Society, vol. 115(503), pages 368-390, 04.
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