Binary games with many players

Flavio Menezes and Rohan Pitchford ()

Economic Theory, 2006, vol. 28, issue 1, 125-143

Abstract: We examine a problem with n players each facing the same binary choice. One choice is superior to the other. The simple assumption of competition - that an individual’s payoff falls with a rise in the number of players making the same choice, guarantees the existence of a unique symmetric equilibrium (involving mixed strategies). As n increases, there are two opposing effects. First, events in the middle of the distribution - where a player finds itself having made the same choice as many others - become more likely, but the payoffs in these events fall. In opposition, events in the tails of the distribution - where a player finds itself having made the same choice as few others - become less likely, but the payoffs in these events remain high. We provide a sufficient condition (strong competition) under which an increase in the number of players leads to a reduction in the equilibrium probability that the superior choice is made. Copyright Springer-Verlag Berlin/Heidelberg 2006

Keywords: Binary choices; Competition; Entry. (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s00199-005-0611-z

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