Division of the Humanities and Social Sciences California Institute of Technology Pasadena, California 91125 a Contraction Principle for Finite Global Games
نویسنده
چکیده
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 property. Furthermore, the contraction mapping approach provides a revealing 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. I apply my result to show that uniqueness is obtained through contraction in currency crises and Diamond’s search models. JEL classification numbers: C72, D82
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Peter Sokol-Hessner, Colin F. Camerer, and Elizabeth A. Phelps Division of the Humanities and Social Sciences (HSS), California Institute of Technology, Division of the Humanities and Social Sciences (HSS) and Computational and Neural Systems (CNS), California Institute of Technology, 1200 E. California Blvd., Pasadena, CA 91125, USA, and Department of Psychology, New York University, 6 Washing...
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