Monotone methods for equilibrium selection under perfect foresight dynamics

Daisuke Oyama (), Satoru Takahashi () and Josef Hofbauer

Theoretical Economics, 2008, vol. 3, issue 2, pages 155-192

Abstract: This paper studies a dynamic adjustment process in a large society of forward-looking agents where payoffs are given by a normal form supermodular game. The stationary states of the dynamics correspond to the Nash equilibria of the stage game. It is shown that if the stage game has a monotone potential maximizer, then the corresponding stationary state is uniquely linearly absorbing and globally accessible for any small degree of friction. A simple example of a unanimity game with three players is provided where there are multiple globally accessible states for a small friction.

Keywords: Equilibrium selection; perfect foresight dynamics; supermodular game; strategic complementarity; stochastic dominance; potential; monotone potential (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Date: 2008 Written
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Related works:
Working Paper: Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics (2003)
Working Paper: Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics (2003)
Working Paper: Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics (2004)
Working Paper: Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics (2003)
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