scholarly journals Crises: Equilibrium Shifts and Large Shocks

2019 ◽  
Vol 109 (8) ◽  
pp. 2823-2854 ◽  
Author(s):  
Stephen Morris ◽  
Muhamet Yildiz
Keyword(s):  
Incomplete Information ◽  
Coordination Games ◽  
Critical Threshold ◽  
Fat Tails ◽  
Common Shocks ◽  
Fat Tail ◽  
Games With Incomplete Information

We study the informational events that trigger equilibrium shifts in coordination games with incomplete information. Assuming that the distribution of the changes in fundamentals has fat tails, we show that majority play shifts either if fundamentals reach a critical threshold or if there are large common shocks, even before the threshold is reached. The fat-tail assumption matters because it implies that large shocks make players more unsure about whether their payoffs are higher than others. This feature is crucial for large shocks to matter. (JEL C72, C73, D83)

scholarly journals Ordinal Polymatrix Games with Incomplete Information

2020 ◽  
Author(s):  
Nahla Ben Amor ◽  
Hélène Fargier ◽  
Régis Sabbadin ◽  
Meriem Trabelsi
Keyword(s):  
Incomplete Information ◽  
Complete Information ◽  
Coordination Games ◽  
Compact Representation ◽  
Product Spaces ◽  
Incomplete Knowledge ◽  
Polymatrix Games ◽  
Standard Normal ◽  
Games With Incomplete Information ◽  
Suitable Framework

Possibilistic games with incomplete information (Π-games) constitute a suitable framework for the representation of ordinal games under incomplete knowledge. However, representing a Π-game in standard normal form requires an extensive expression of the utility functions and the possibility distribution, namely, on the product spaces of actions and types. In the present work, we propose a less costly view of Π-games, namely min-based polymatrix Π-games, which allows to concisely specify Π-games with local interactions. This framework allows, for instance, the compact representation of coordination games under uncertainty where the satisfaction of an agent is high if and only if her strategy is coherent with all of her neighbors, the game being possibly only incompletely known to the agents. Then, an important result of this paper is to show that a min-based polymatrix Π-game can be transformed, in polynomial time, into a (complete information) min-based polymatrix game with identical pure Nash equilibria. Finally, we show that the latter family of games can be solved through a MILP formulation. Experiments on variants of the GAMUT problems confirm the feasibility of this approach.

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