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

See all articles by Larry S. Karp

Larry S. Karp

University of California, Berkeley

In Ho Lee

University of Southampton - Division of Economics

Robin A. Mason

University of Southampton - Division of Economics; Centre for Economic Policy Research (CEPR)

Date Written: January 2003

Abstract

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

Karp, Larry S. and Lee, In Ho and Mason, Robin, Global Game with Strategic Substitutes and Complements (January 2003). U of California at Berkeley, Agricultural and Resource Economics Working Paper No. 940. Available at SSRN: https://ssrn.com/abstract=375627 or http://dx.doi.org/10.2139/ssrn.375627

Larry S. Karp (Contact Author)

University of California, Berkeley ( email )

Dept. of Agriculture & Resource Economics
313 Giannini Hall
Berkeley, CA 94720
United States
510-643-8911 (Fax)

In Ho Lee

University of Southampton - Division of Economics ( email )

Southampton, SO17 1BJ
United Kingdom
(023) 8059 2529 (Phone)
(023) 8059 3858 (Fax)

Robin Mason

University of Southampton - Division of Economics ( email )

Southampton, SO17 1BJ
United Kingdom
+44 23 8059 3268 (Phone)
+44 23 8059 3858 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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