Title

Common Belief Foundations of Global Games

Author(s)

Stephen Morris Stephen Morris (Princeton University)

Hyun Song Shin Hyun Shin (Bank for International Settlements)

Muhamet Yildiz Muhamet Yildiz (M.I.T.)

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.

Creation Date

2015-11

Section URL ID

Paper Number

069_2015

URL

http://detc.princeton.edu/wp-content/uploads/2016/11/wp069_2015-revised-Nov2015_Morris_Shin_Yildiz_Common-Belief-Foundations.pdf

File Function

Jel

C70, D83

Keyword(s)

Suppress

false

Series

10