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Games with strategic complements and substitutes

Author

Listed:
  • Andrew J. Monaco

    (University of Puget Sound)

  • Tarun Sabarwal

    (University of Kansas)

Abstract

This paper studies games with both strategic substitutes and strategic complements, and more generally, games with strategic heterogeneity (GSH). Such games may behave differently from either games with strategic complements or games with strategic substitutes. Under mild assumptions (on one or two players only), the equilibrium set in a GSH is totally unordered (no two equilibria are comparable in the standard product order). Moreover, under mild assumptions (on one player only), parameterized GSH do not allow decreasing equilibrium selections. In general, this cannot be strengthened to conclude increasing selections. Monotone comparative statics results are presented for games in which some players exhibit strategic substitutes and others exhibit strategic complements. For two-player games with linearly ordered strategy spaces, there is a characterization. More generally, there are sufficient conditions. The conditions apply only to players exhibiting strategic substitutes; no additional conditions are needed for players with strategic complements. Several examples highlight the results.

Suggested Citation

  • Andrew J. Monaco & Tarun Sabarwal, 2016. "Games with strategic complements and substitutes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 65-91, June.
    • Handle: RePEc:spr:joecth:v:62:y:2016:i:1:d:10.1007_s00199-015-0864-0
    DOI: 10.1007/s00199-015-0864-0
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    More about this item

    Keywords

    Lattice games; Strategic complements; Strategic substitutes; Strategic heterogeneity; Equilibrium set; Monotone comparative statics;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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