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A Dominance Solvable Global Game with Strategic Substitutes

  • Rodrigo Harrison
  • Pedro Jara-Moroni

Global games emerged as an approach to equilibrium selection. For a general setting with supermodular payoffs unique selection of equilibrium has been obtained through iterative elimination of strictly dominated strategies. For the case of global games with strategic substitutes, uniqueness of equilibrium has not been proved by iterative elimination of strictly dominated strategies, making the equilibrium less appealing. In this work we study a simple three player binary action global game with strategic substitutes for which we provide a condition for dominance solvability. This opens an unexplored research agenda on the study of global games with strategic substitutes.

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Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 440.

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Date of creation: 2013
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Handle: RePEc:ioe:doctra:440
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  1. Hans Carlsson & Eric van Damme, 1993. "Global Games and Equilibrium Selection," Levine's Working Paper Archive 122247000000001088, David K. Levine.
  2. Roger Guesnerie, 2005. "Strategic substitutabilities versus strategic complementarities: Towards a general theory of expectational coordination?," PSE Working Papers halshs-00590856, HAL.
  3. Morris, Stephen & Shin, Hyun Song, 1997. "Unique Equilibrium in a Model of Self-fulfilling Currency Attacks," CEPR Discussion Papers 1687, C.E.P.R. Discussion Papers.
  4. Rodrigo Harrison, 2003. "Global Games with Strategic Substitutes," Working Papers gueconwpa~03-03-06, Georgetown University, Department of Economics.
  5. Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 869-905.
  6. Christian Basteck & Tijmen R. Daniëls, 2010. "Every Symmetric 3 x 3 Global Game of Strategic Complementarities Is Noise Independent," SFB 649 Discussion Papers SFB649DP2010-061, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  7. Goldstein, Itay & Pauzner, Ady, 2004. "Contagion of self-fulfilling financial crises due to diversification of investment portfolios," Journal of Economic Theory, Elsevier, vol. 119(1), pages 151-183, November.
  8. Guesnerie, R., 1999. "Anchoring Economic Predictions in Common Knowledge," DELTA Working Papers 1999-06, DELTA (Ecole normale supérieure).
  9. Oury, Marion, 2013. "Noise-independent selection in multidimensional global games," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2638-2665.
  10. 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.
  11. Roger Guesnerie & Pedro Jara-Moroni, 2011. "Expectational coordination in simple economic contexts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(2), pages 205-246, June.
  12. Alexander Zimper, 2007. "A fixed point characterization of the dominance-solvability of lattice games with strategic substitutes," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(1), pages 107-117, September.
  13. Honda, Jun, 2011. "Noise-independent selection in global games and monotone potential maximizer: A symmetric 3×3 example," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 663-669.
  14. Christian Basteck & Tijmen R. Daniëls & Frank Heinemann, 2010. "Characterising Equilibrium Selection in Global Games with Strategic Complementarities," SFB 649 Discussion Papers SFB649DP2010-008, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  15. Frankel, David M. & Morris, Stephen & Pauzner, Ady, 2003. "Equilibrium Selection in Global Games with Strategic Complementarities," Staff General Research Papers 11920, Iowa State University, Department of Economics.
  16. Guesnerie, R., 1989. "An Exploration of the Eductive Justifications of the Rational Expectations Hypotbesis," DELTA Working Papers 89-24, DELTA (Ecole normale supérieure).
  17. Rodrigo J. Harrison, 2003. "Equilibrium Selection in Global Games with Strategic Substitutes," Game Theory and Information 0306003, EconWPA.
  18. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
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