A contraction principle for finite global games

Laurent Mathevet

    Research output: Contribution to journalArticle

    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.

    Original languageEnglish (US)
    Pages (from-to)539-563
    Number of pages25
    JournalEconomic Theory
    Volume42
    Issue number3
    DOIs
    StatePublished - Dec 2009

    Keywords

    • Contraction mapping
    • Equilibrium uniqueness
    • Global games
    • Strategic complementarities
    • Supermodular games

    ASJC Scopus subject areas

    • Economics and Econometrics

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