A contraction principle for finite global games

Laurent Mathevet

doi:10.1007/s00199-008-0411-3

Economic Theory

March 2010, 42:539

A contraction principle for finite global games

Authors
Authors and affiliations

Laurent MathevetEmail author

Research Article

First Online:: 19 September 2008

Received:: 27 July 2007
Accepted:: 28 August 2008

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

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Laurent Mathevet
- 1
Email author

1.University of Texas at AustinAustinUSA

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A contraction principle for finite global games

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