Global Games: Theory and Applications

Stephen Morris and Hyun Song Shin

No 1275R, 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 games and dynamic games with payoff shocks.

Keywords: Common knowledge; coordination; currency crises; global games; higher order beliefs; unique equilibrium (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2000-09, Revised 2001-08
New Economics Papers: this item is included in nep-ent, nep-gth, nep-ifn and nep-net
Note: CFP 1097.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

Published in M. Dewatripont, L. Hansen and S. Turnovsky, eds., Advanced in Economics and Econometrics, Vol. 1, Cambridge University Press, 2003, pp. 57-114

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Working Paper: Global Games: Theory and Applications (2001)
Working Paper: Global Games: Theory and Applications (2000)
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