IDEAS home Printed from https://ideas.repec.org/p/upf/upfgen/546.html
   My bibliography  Save this paper

On payoff heterogeneity in games with strategic complementarities

Author

Abstract

Payoff heterogeneity weakens positive feedback in binary choice models in two ways. First, heterogeneity drives individuals to corners where they are unaffected by strategic complementarities. Second, aggregate behaviour is smoother than individual behaviour when individuals are heterogeneous. However, this smoothing does not necessarily eliminate positive feedback or guarantee a unique equilibrium. In games with an unbounded, continuous choice space, heterogeneity may either weaken or strengthen positive feedback, depending on a simple convexity/concavity condition. We conclude that positive feedback phenomena derived in representative agent models will often be robust to heterogeneity.

Suggested Citation

  • Antonio Ciccone & James Costain, 2001. "On payoff heterogeneity in games with strategic complementarities," Economics Working Papers 546, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2002.
    • Handle: RePEc:upf:upfgen:546
    as

    Download full text from publisher

    File URL: https://econ-papers.upf.edu/papers/546.pdf
    File Function: Whole Paper
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, vol. 88(3), pages 587-597, June.
    2. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(3), pages 441-463.
    3. Berthold Herrendorf & Akos Valentinyi & Robert Waldmann, 2000. "Ruling Out Multiplicity and Indeterminacy: The Role of Heterogeneity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 295-307.
    4. Schmutzler, Armin, 1998. "Changing places--the role of heterogeneity and externalities in cumulative processes," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 445-461, July.
    5. Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 869-905.
    6. Kneip, Alois, 1999. "Behavioral heterogeneity and structural properties of aggregate demand," Journal of Mathematical Economics, Elsevier, vol. 31(1), pages 49-79, February.
    7. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    8. Caballero, Ricardo J, 1992. "A Fallacy of Composition," American Economic Review, American Economic Association, vol. 82(5), pages 1279-1292, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Randolph Luca Bruno, 2006. "Unique Equilibrium in a Model of Rule of Law," LEM Papers Series 2006/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Stephen Morris & Hyun Song Shin, 2003. "Heterogeneity and Uniqueness in Interaction Games," Cowles Foundation Discussion Papers 1402, Cowles Foundation for Research in Economics, Yale University.
    3. Arianna Dal Forno & Ugo Merlone, 2019. "Heterogeneous Society in Binary Choices with Externalities," Dynamic Games and Applications, Springer, vol. 9(2), pages 433-457, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Berthold Herrendorf & Akos Valentinyi & Robert Waldmann, 2000. "Ruling Out Multiplicity and Indeterminacy: The Role of Heterogeneity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 295-307.
    2. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2006. "Signaling in a Global Game: Coordination and Policy Traps," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 452-484, June.
    3. Huanxing Yang, 2010. "Information aggregation and investment cycles with strategic complementarity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 43(2), pages 281-311, May.
    4. Angeletos, G.-M. & Lian, C., 2016. "Incomplete Information in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1065-1240, Elsevier.
    5. Karp, Larry & Paul, Thierry, 2005. "Friction and the Multiplicity of Equilibria," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt1r57v43d, Department of Agricultural & Resource Economics, UC Berkeley.
    6. Ernesto Pasten & Yang K. Lu, 2010. "Coordination of Expectations and the Informational Role of Policy," 2010 Meeting Papers 985, Society for Economic Dynamics.
    7. HAMADA Kouichi & TANABE Yasuo, 2003. "Noisy Signals and Unsophisticated Players in a Coordination Model of a Barter Economy," ESRI Discussion paper series 076, Economic and Social Research Institute (ESRI).
    8. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275, Cowles Foundation for Research in Economics, Yale University.
    9. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2003. "Coordination and Policy Traps," NBER Working Papers 9767, National Bureau of Economic Research, Inc.
    10. Antonio Cabrales & Rosemarie Nagel & Roc Armenter, 2007. "Equilibrium selection through incomplete information in coordination games: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 10(3), pages 221-234, September.
    11. Ennis, Huberto M. & Keister, Todd, 2005. "Government policy and the probability of coordination failures," European Economic Review, Elsevier, vol. 49(4), pages 939-973, May.
    12. , & ,, 2013. "Selection-free predictions in global games with endogenous information and multiple equilibria," Theoretical Economics, Econometric Society, vol. 8(3), September.
    13. Camille Cornand & Frank Heinemann, 2015. "Macro-expérimentation autour des fonctions des banques centrales," Revue française d'économie, Presses de Sciences-Po, vol. 0(2), pages 3-47.
    14. Daisuke Oyama & Yasuhiro Sato & Takatoshi Tabuchi & Jacques-François Thisse, 2009. "On the impact of trade on industrial structures: The role of entry cost heterogeneity," Working Papers halshs-00566786, HAL.
    15. Karp, Larry S., 2008. "Correct (and misleading) arguments for using market based pollution control policies," CUDARE Working Papers 42868, University of California, Berkeley, Department of Agricultural and Resource Economics.
    16. Roger Guesnerie & Pedro Jara-Moroni, 2007. "Expectational coordination in a class of economic models: Strategic substitutabilities versus strategic complementarities," PSE Working Papers halshs-00587837, HAL.
    17. Antonio Cabrales & Michalis Drouvelis & Zeynep Gurguy & Indrajit Ray, 2017. "Transparency is Overrated: Communicating in a Coordination Game with Private Information," CESifo Working Paper Series 6781, CESifo.
    18. Herrendorf, Berthold & Valentinyi, Akos, 2006. "On the stability of the two-sector neoclassical growth model with externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 30(8), pages 1339-1361, August.
    19. Rungcharoenkitkul, Phurichai, 2005. "Coordination failure cycle," MPRA Paper 37970, University Library of Munich, Germany, revised Mar 2012.
    20. Levin, Dan & Peck, James, 2008. "Investment dynamics with common and private values," Journal of Economic Theory, Elsevier, vol. 143(1), pages 114-139, November.

    More about this item

    Keywords

    Heterogeneity; multiplicity; discrete choice; strategic complementarity; positive feedback;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • E00 - Macroeconomics and Monetary Economics - - General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:546. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: http://www.econ.upf.edu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.