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Monotone Comparative Statics in Games with both Strategic Complements and Strategic Substitutes

Andrew Monaco and Tarun Sabarwal ()
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Andrew Monaco: Department of Economics, University of Kansas

No 201236, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: This paper analyzes games with both strategic substitutes and strategic complements. Such games may behave differently from either games with strategic complements or games with strategic substitutes. In such games, equilibria do not decrease as the parameter increases. Moreover, natural conditions are presented to guarantee that an increase in the parameter leads to an increase in the equilibrium: in other words, conditions to guarantee monotone comparative statics. These conditions are based on intuitive tradeoffs between direct parameter effects and indirect strategic effects. These conditions are needed only for players with strategic substitutes; no conditions are imposed on players with strategic complements. Several examples highlight the results.

Keywords: Lattice games; strategic complements; strategic substitutes; equilibrium set; monotone comparative statics (search for similar items in EconPapers)
JEL-codes: C70 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth and nep-mic
Date: 2012-08, Revised 2012-08
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Persistent link: https://EconPapers.repec.org/RePEc:kan:wpaper:201236

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