Global Game with Strategic Substitutes and Complements
U of California at Berkeley, Agricultural and Resource Economics Working Paper No. 940
22 Pages Posted: 4 Mar 2003
Date Written: January 2003
We study a global game in which actions are strategic complements over some region and strategic substitutes over another region. An agent's payoff depends on a market fundamental and the actions of other agents. If the degree of congestion is sufficiently large, agents' strategies are non-monotonic in their signal about the market fundamental. In this case, a signal that makes them believe that the market fundamental is more favorable for an action may make them less likely to take the action, because of the risk of overcrowding.
Keywords: global games, congestion, coordination problem
JEL Classification: C79, D84
Suggested Citation: Suggested Citation