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A contraction principle for finite global games

Mathevet, Laurent (2010) A contraction principle for finite global games. Economic Theory, 42 . pp. 539-563. ISSN 0938-2259. doi:10.1007/s00199-008-0411-3.

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I provide a new proof of uniqueness of equilibrium in a wide class of global games. I show that the joint best-response in these games is a contraction. The uniqueness result then follows as a corollary of the contraction principle. Furthermore, the contraction-mapping approach provides an intuition for why uniqueness arises: complementarities in games generate multiplicity of equilibria, but the global-games structure dampens complementarities so that only one equilibrium exists.

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Additional Information:© Springer-Verlag 2008. This paper is a shortened version of the first chapter of my dissertation at Caltech. I am profoundly grateful to the members of my dissertation committee, Federico Echenique, Matt Jackson, Preston McAfee and Leeat Yariv, for their help and encouragement. I also wish to thank Kim Border, Chris Chambers, Sylvain Chassang, Jon Eguia, Chryssi Giannitsarou, Andrea Mattozzi, Stephen Morris, Laura Panattoni, Flavio Toxvaerd, David Young and the seminar participants of the workshop on global games (Stony Brook, 2007) and the University of Saint-Etienne. The Division of Humanities and Social Sciences at Caltech and Matt Jackson are gratefully acknowledged for financial support. Formerly SSWP 1243.
Funding AgencyGrant Number
Caltech Division of Humanities and Social SciencesUNSPECIFIED
Matthew O. JacksonUNSPECIFIED
Subject Keywords:Global games, Equilibrium uniqueness, Contraction mapping, Strategic complementarities, Supermodular games
Classification Code:JEL: C72, D82
Record Number:CaltechAUTHORS:20171208-165230307
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83779
Deposited By: Jacquelyn Bussone
Deposited On:20 Dec 2017 19:43
Last Modified:15 Nov 2021 20:14

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