Independence and heterogeneity in games of incomplete information
Mason, Robin and Valentinyi, Akos (2003) Independence and heterogeneity in games of incomplete information. Southampton, GB, University of Southampton (Discussion Papers in Economics and Econometrics 0307).
This paper provides a sufficient condition for existence and uniqueness of equilibrium, which is in monotone pure strategies, in games of incomplete information. First, we show that if each player’s incremental ex post payoff is uniformly increasing in its own action and type, and its type is sufficiently uninformative of the types of its opponents (independence), then its expected payoff satisfies a strict single crossing property in its own action and type, for any strategy profile played by its opponents. This ensures that a player’s best response to any strategy profile is a monotone pure strategy. Secondly, we show that if, in addition, there is sufficient heterogeneity of the conditional density of types, then the best response correspondence is a contraction mapping. This ensures equilibrium existence and uniqueness. In contrast to existing results, our uniqueness result does not rely on strategic complementarities; this allows for a wider range of applications.
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||JEL classification: C72; D82|
|Keywords:||incomplete information, heterogeneity, existence, unique pure strategy equilibrium|
|Subjects:||H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
|Divisions:||University Structure - Pre August 2011 > School of Social Sciences > Economics
|Date Deposited:||17 Nov 2010 11:30|
|Last Modified:||28 Mar 2014 15:26|
Funded by: ESRC (R000271265)
UNSPECIFIED to UNSPECIFIED
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