GLOBAL GAMES WITH STRATEGIC SUBSTITUTES

Rodrigo Harrison and Pedro Jara‐Moroni
Authors registered in the RePEc Author Service: Pedro Daniel Jara-Moroni

International Economic Review, 2021, vol. 62, issue 1, 141-173

Abstract: We study global games with strategic substitutes. Specifically, for a class of binary‐action, N‐player games with strategic substitutes, we prove that under payoff asymmetry, as incomplete information vanishes, the global games approach selects a unique equilibrium. We characterize this equilibrium profile ; players employ switching strategies at different cutoff signals, the order of which is directly determined by payoff asymmetry. We provide examples that illustrate our result and its connection with dominance solvability. We extend the global game literature, which has thus far been developed for games with strategic complementarities, to new applications in industrial organization, collective action problems, finance, etc .

Date: 2021
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