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Common belief foundations of global games

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  • Morris, Stephen
  • Shin, Hyun Song
  • Yildiz, Muhamet

Abstract

We study coordination games under general type spaces. We characterize rationalizable actions in terms of the properties of the belief hierarchies and show that there is a unique rationalizable action played whenever there is approximate common certainty of rank beliefs, defined as the probability the players assign to their payoff parameters being higher than their opponents'. We argue that this is the driving force behind selection results for the specific type spaces in the global games literature.

Suggested Citation

  • Morris, Stephen & Shin, Hyun Song & Yildiz, Muhamet, 2016. "Common belief foundations of global games," Journal of Economic Theory, Elsevier, vol. 163(C), pages 826-848.
    • Handle: RePEc:eee:jetheo:v:163:y:2016:i:c:p:826-848
    DOI: 10.1016/j.jet.2016.03.007
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    More about this item

    Keywords

    Global games; Risk-dominance; Rank beliefs; Higher-order beliefs; Rationalizability;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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