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Global Games With Strategic Complements and Substitutes

Eric Hoffmann and Tarun Sabarwal ()
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Eric Hoffmann: Department of Economics, The University of Kansas

No 201908, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: We extend the global games method to the class of finite player, finite action games that includes games with strategic complements, games with strategic substitutes, and arbitrary combinations of the two. Our result is based on common order properties present in both strategic complements and substitutes, the notion of p-dominance, and the use of dominance solvability as the solution concept. In addition to being closer to the original arguments in Carlsson and van Damme (1993), our approach requires fewer additional assumptions. In particular, we require only one dominance region, and no assumptions on state monotonicity, or aggregative structure, or overlapping dominance regions. As expected, the p-dominance condition becomes more restrictive as the number of players increases. In cases where the probabilistic burden in belief formation may be reduced, the p-dominance condition may be relaxed as well. We present examples that are not covered by existing results.

Keywords: Global games; Strategic complements; Strategic substitutes; Monotone games; Equilibrium selection (search for similar items in EconPapers)
JEL-codes: C70 C72 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2019-08
New Economics Papers: this item is included in nep-gth and nep-mic
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