Recurrent crises in global games

B-Tier
Journal: Journal of Mathematical Economics
Year: 2012
Volume: 48
Issue: 5
Pages: 309-321

Score contribution per author:

2.011 = (α=2.01 / 1 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Global games have unique equilibria in which aggregate behavior changes sharply when an underlying random fundamental crosses some threshold. This property relies on the existence of dominance regions: all players have a highest and lowest action that, for some fundamentals, is strictly dominant. But if the fundamental follows a random walk, it eventually spends nearly all of its time in these regions: crises gradually disappear. We obtain recurring crises by adding a single large player who lacks dominance regions. We also show that in order to obtain recurring crises, one must either relax dominance regions or restrict to fundamentals that continually return to or cross over a fixed region.

Technical Details

RePEc Handle
repec:eee:mateco:v:48:y:2012:i:5:p:309-321
Journal Field
Theory
Author Count
1
Added to Database
2026-01-25