Global Games: Theory and Applications

Stephen Morris and Hyun Song Shin

No 1275, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Global games are games of incomplete information whose type space is determined by the players each observing a noisy signal of the underlying state. With strategic complementarities, global games often have a unique, dominance solvable equilibrium, allowing analysis of a number of economic models of coordination failure. For symmetric binary action global games, equilibrium strategies in the limit (as noise becomes negligible) are simple to characterize in terms of 'diffuse' beliefs over the actions of others. We describe a number of economic applications that fall in this category. We also explore the distinctive roles of public and private information in this setting, review results for general global games, discuss the relationship between global games and a literature on higher order beliefs in game theory and describe the relationship to local interaction and dynamic games with payoff shocks.

Keywords: Global games; common knowledge; unique equilibrium; currency crises; bank runs and liquidity (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2000-09
Note: CFP 1097.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

Published in M. Dewatripont, L. Hansen and S. Turnovsky, Advanced in Economics and Econometrics, Vol. 1, 2003

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Working Paper: Global Games: Theory and Applications (2001)
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