On the Relationship between Robustness to Incomplete Information and
Noise-Independent Selection in Global Games

Daisuke Oyama
Faculty of Economics, University of Tokyo


Satoru Takahashi
Department of Economics, Princeton University

This note demonstrates that a symmetric 3 × 3 supermodular game may fail to have any equilibrium robust to incomplete information. Since the global game solution in symmetric 3 × 3 supermodular games is known to be independent of the noise structure, this result implies that a noise-independent selection in global games may not be a robust equilibrium. Our proof reveals that the assumption in global games that the noise errors are independent of the state imposes a non-trivial restriction on incomplete information perturbations. Journal of Economic Literature Classification Numbers: C72, D82.
Key Words: equilibrium selection; supermodular game; incomplete information; robustness; contagion; global game.

Journal of Mathematical Economics 47 (2011) 683-688. PDF file
First draft: April 28, 2011; this version: August 21, 2011. PDF file

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