Non-Monotone Comparative Statics in Games of Incomplete Information∗

This paper analyses comparative statics for two classes of n-player games of incomplete information with continuous action spaces. The two classes are defined by differences in the payoff and behaviour of the weakest type: the lowest value bidder or highest cost firm. We show that in “weakly competitive games”, including all-pay auctions and some oligopoly models, weak types will respond to a stochastically higher distribution of types by playing less aggressively. In “strongly competitive” games, all types play more aggressively. Furthermore, we show that a decrease in dispersion of types, in the sense of a refinement of second order stochastic dominance, although also associated with an increase in competitiveness, may in addition result in less aggressive play by strong types in both strongly and weakly competitive games. Journal of Economic Literature classification numbers: C72, D31, D44, D81.