Monotone methods for equilibrium selection under perfect foresight dynamics

, (), , () and , ()
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,: Graduate School of Economics, Hitotsubashi University
,: Department of Economics, Princeton University
,: Department of Mathematics, University of Vienna
Authors registered in the RePEc Author Service: Josef Hofbauer, Satoru Takahashi and Daisuke Oyama

Theoretical Economics, 2008, vol. 3, issue 2

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: 2008-06-01
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Citations: View citations in EconPapers (27)

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Related works:
Working Paper: Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics (2004)
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 (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:the:publsh:194

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