A contraction principle for finite global games
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- Mathevet, L. Econ Theory (2010) 42: 539. 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.