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Global Games Selection in Games with Strategic Substitutes or Complements

  • Eric Hoffmann

    (Department of Economics, The University of Kansas)

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    Global games methods are aimed at resolving issues of multiplicity of equilibria and coordination failure that arise in game theoretic models by relaxing common knowledge assumptions about an underlying parameter. These methods have recently received a lot of attention when the underlying complete information game is one of strategic complements (GSC). Little has been done in this direction concerning games of strategic substitutes (GSS), however. This paper complements the existing literature in both cases by extending the global games method developed by Carlsson and Van Damme (1993) to N-player, multi-action GSS and GSC, using a p-dominance condition as the selection criterion. Moreover, this approach is much less restrictive on the conditions that players and the underlying parameter space must satisfy, and therefore serves to circumvent recent criticisms to global games methods. The second part of this paper generalizes the model by allowing groups of players to receive homogenous signals, which, under certain conditions, strengthens the model's power of predictability.

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    File URL: http://www2.ku.edu/~kuwpaper/2013Papers/201308.pdf
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    Paper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 201308.

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    Length: 30 pages
    Date of creation: Oct 2013
    Date of revision:
    Handle: RePEc:kan:wpaper:201308
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    1. Roy, Sunanda & Sabarwal, Tarun, 2012. "Characterizing stability properties in games with strategic substitutes," Games and Economic Behavior, Elsevier, vol. 75(1), pages 337-353.
    2. Atsushi Kajii & Stephen Morris, 1997. "The Robustness of Equilibria to Incomplete Information," Econometrica, Econometric Society, vol. 65(6), pages 1283-1310, November.
    3. Rodrigo Harrison, 2003. "Global Games with Strategic Substitutes," Working Papers gueconwpa~03-03-06, Georgetown University, Department of Economics.
    4. Van Zandt, Timothy, 2010. "Interim Bayesian Nash equilibrium on universal type spaces for supermodular games," Journal of Economic Theory, Elsevier, vol. 145(1), pages 249-263, January.
    5. Frankel, David M. & Morris, Stephen & Pauzner, Ady, 2003. "Equilibrium selection in global games with strategic complementarities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 1-44, January.
    6. Roy, Sunanda & Sabarwal, Tarun, 2009. "Monotone Comparative Statics for Games With Strategic Substitutes," Staff General Research Papers 31558, Iowa State University, Department of Economics.
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