World Library  
Flag as Inappropriate
Email this Article

Global games

Article Id: WHEBN0014146383
Reproduction Date:

Title: Global games  
Author: World Heritage Encyclopedia
Language: English
Subject: Ahmet Gueye
Publisher: World Heritage Encyclopedia

Global games

In economics and game theory, global games are games of incomplete information where players receive possibly-correlated signals of the underlying state of the world. Global games were originally defined by Carlsson and van Damme (1993).[1]

The most important practical application of global games has been the study of crises in financial markets such as bank runs, currency crises, and bubbles. However, they have other relevant applications such as investments with payoff complementarities, beauty contests, political riots and revolutions, and any other economic situation which displays strategic complementarity.

Global games in models of currency crises

Stephen Morris and Hyun Song Shin (1998)[2] considered a stylized currency crises model, in which traders observe the relevant fundamentals with small noise, and show that this leads to the selection of a unique equilibrium. This result overturns the result in models of complete information, which feature multiple equilibria.

One concern with the robustness of this result is that the introduction of a theory of prices in global coordination games may reintroduce multiplicity of equilibria (Atkeson, 2001). This concern was addressed in Angeletos and Werning (2006)[3] and Hellwig et. al.(2006).[4] They show that equilibrium multiplicity may be restored by the existence of prices acting as an endogenous public signal, provided that private information is sufficiently precise.


Further reading

  • Andrew G. Atkeson, (2001), "Rethinking Multiple Equilibria in Macroeconomic Modeling: Comment." In NBER Macroeconomics Annual 2000, ed. Ben S. Bernanke and Kenneth Rogoff, 162–71. Cambridge, MA: MIT Press.
  • Stephen Morris & Hyun S Shin, 2001. "Global Games: Theory and Applications."
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from World Library are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.