Equilibrium Selection in Global Games with Strategic Complementarities

63 Pages Posted: 27 Nov 2001

See all articles by David M. Frankel

David M. Frankel

Iowa State University - Department of Economics

Stephen Morris

Princeton University - Department of Economics

Ady Pauzner

Tel Aviv University - Eitan Berglas School of Economics

Date Written: November 2001

Abstract

We study games with strategic complementarities, arbitrary numbers of players and actions, and slightly noisy payoff signals. We prove limit uniqueness: as the signal noise vanishes, the game has a unique strategy profile that survives iterative dominance. This generalizes a result of Carlsson and van Damme (1993) for two player, two action games. Te surviving profile, however, may depend on fine details of the structure of the noise. We provide sufficient conditions on payoffs for there to be noise-independent selection.

Keywords: Equilibrium Selection, Global Games, Strategic Complementarities, Supermodular Games

JEL Classification: C72, D82

Suggested Citation

Frankel, David M. and Morris, Stephen Edward and Pauzner, Ady, Equilibrium Selection in Global Games with Strategic Complementarities (November 2001). Cowles Foundation Discussion Paper No. 1336. Available at SSRN: https://ssrn.com/abstract=291411

David M. Frankel

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States

Stephen Edward Morris (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Ady Pauzner

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9297 (Phone)
972-3-640-9908 (Fax)

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