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Games with Strategic Complements and Substitutes

Andrew Monaco and Tarun Sabarwal ()
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Andrew Monaco: Department of Economics, University of Puget Sound

No 201408, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: This paper studies games with both strategic substitutes and strategic complements, and more generally, games with strategic heterogeneity (GSH). Such games may behave differently from either games with strategic complements or games with strategic sub- stitutes. Under mild assumptions (on one or two players only), the equilibrium set in a GSH is totally unordered (no two equilibria are comparable in the standard product order). Moreover, under mild assumptions (on one player only), parameterized GSH do not allow decreasing equilibrium selections. In general, this cannot be strengthened to conclude increasing selections. Monotone comparative statics results are presented for games in which some players exhibit strategic substitutes and others exhibit strategic complements. For two-player games with linearly ordered strategy spaces, there is a char- acterization. More generally, there are sufficient conditions. The conditions apply only to players exhibiting strategic substitutes; no additional conditions are needed for players with strategic complements. Several examples highlight the results.

Keywords: Lattice games; strategic complements; strategic substitutes; strategic hetero- geneity; equilibrium set; monotone comparative statics (search for similar items in EconPapers)
JEL-codes: C70 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-gth, nep-hpe and nep-mic
Date: 2015-01, Revised 2015-01
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Journal Article: Games with strategic complements and substitutes (2016) Downloads
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