A Global Game with Heterogenous Priors

Wolfgang Kuhle

Papers from arXiv.org

Abstract: This paper relaxes the common prior assumption in the public and private information game of Morris and Shin (2000, 2004). For the generalized game, where the agent's prior expectations are heterogenous, it derives a sharp condition for the emergence of unique/multiple equilibria. This condition indicates that unique equilibria are played if player's public disagreement is substantial. If disagreement is small, equilibrium multiplicity depends on the relative precisions of private signals and subjective priors. Extensions to environments with public signals of exogenous and endogenous quality show that prior heterogeneity, unlike heterogeneity in private information, provides a robust anchor for unique equilibria. Finally, irrespective of whether priors are common or not, we show that public signals can ensure equilibrium uniqueness, rather than multiplicity, if they are sufficiently precise.

Date: 2013-12
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1312.7860

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