Equilibrium Selection in Binary Supermodular Games under Perfect Foresight Dynamics
University of Tokyo - Faculty of Economics
Harvard University - Department of Economics
University of Vienna - Department of Mathematics
June 8, 2009
This paper studies equilibrium selection in binary supermodular games based on perfect foresight dynamics. We provide complete characterizations of absorbing and globally accessible equilibria and apply them to two subclasses of games. First, for unanimity games, it is shown that our selection criterion is not in agreement with that in terms of Nash products, and an example is presented in which two strict Nash equilibria are simultaneously globally accessible when the friction is sufficiently small. Second, a class of games with invariant diagonal are proposed and shown to generically admit an absorbing and globally accessible equilibrium for small frictions.
Number of Pages in PDF File: 23
Keywords: equilibrium selection, perfect foresight dynamics, supermodular game, strategic complementarity, unanimity game, invariant diagonal game
JEL Classification: C72, C73working papers series
Date posted: June 10, 2009
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