Economic Theory

, 42:539

A contraction principle for finite global games

Research Article

DOI: 10.1007/s00199-008-0411-3

Cite this article as:
Mathevet, L. Econ Theory (2010) 42: 539. doi:10.1007/s00199-008-0411-3
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Abstract

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.

Keywords

Global games Equilibrium uniqueness Contraction mapping Strategic complementarities Supermodular games 

JEL Classification

C72 D82 

Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  1. 1.University of Texas at AustinAustinUSA

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