Faculty of Economics, University of Tokyo
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
- J. Honda, Noise-Independent Selection in Global Games and Monotone Potential Maximizer: A Symmetric 3 × 3 Example, Journal of Mathematical Economics 47 (2011), 663-669.
- C. Basteck and T. R. Daniëls, Every Symmetric 3 × 3 Global Game of Strategic Complementarities Has Noise-Independent Selection, Journal of Mathematical Economics 47 (2011), 749-754.