Selection-free predictions in global games with endogenous information and multiple equilibria
Global games with endogenous information often exhibit multiple equilibria. In this paper, we show how one can nevertheless identify useful predictions that are robust across all equilibria and that cannot be delivered in the common-knowledge counterparts of these games. Our analysis is conducted wi...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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The Econometric Society
2013
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| Online Access: | http://hdl.handle.net/1721.1/83253 https://orcid.org/0000-0002-9269-5094 |
| _version_ | 1826198845879484416 |
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| author | Angeletos, George-Marios Pavan, Alessandro |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Angeletos, George-Marios Pavan, Alessandro |
| author_sort | Angeletos, George-Marios |
| collection | MIT |
| description | Global games with endogenous information often exhibit multiple equilibria. In this paper, we show how one can nevertheless identify useful predictions that are robust across all equilibria and that cannot be delivered in the common-knowledge counterparts of these games. Our analysis is conducted within a flexible family of games of regime change, which have been used to model, inter alia, speculative currency attacks, debt crises, and political change. The endogeneity of information originates in the signaling role of policy choices. A novel procedure of iterated elimination of nonequilibrium strategies is used to deliver probabilistic predictions that an outside observer—an econometrician—can form under arbitrary equilibrium selections. The sharpness of these predictions improves as the noise gets smaller, but disappears in the complete-information version of the model. |
| first_indexed | 2024-09-23T11:10:54Z |
| format | Article |
| id | mit-1721.1/83253 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:10:54Z |
| publishDate | 2013 |
| publisher | The Econometric Society |
| record_format | dspace |
| spelling | mit-1721.1/832532022-09-27T17:39:10Z Selection-free predictions in global games with endogenous information and multiple equilibria Angeletos, George-Marios Pavan, Alessandro Massachusetts Institute of Technology. Department of Economics Angeletos, George-Marios Global games with endogenous information often exhibit multiple equilibria. In this paper, we show how one can nevertheless identify useful predictions that are robust across all equilibria and that cannot be delivered in the common-knowledge counterparts of these games. Our analysis is conducted within a flexible family of games of regime change, which have been used to model, inter alia, speculative currency attacks, debt crises, and political change. The endogeneity of information originates in the signaling role of policy choices. A novel procedure of iterated elimination of nonequilibrium strategies is used to deliver probabilistic predictions that an outside observer—an econometrician—can form under arbitrary equilibrium selections. The sharpness of these predictions improves as the noise gets smaller, but disappears in the complete-information version of the model. 2013-12-23T20:28:51Z 2013-12-23T20:28:51Z 2013-10 2012-01 Article http://purl.org/eprint/type/JournalArticle 1933-6837 1555-7561 http://hdl.handle.net/1721.1/83253 “Selection-free predictions in global games with endogenous information and multiple equilibria.” Theoretical Economics 8, no. 3 (2013): 883-938. https://orcid.org/0000-0002-9269-5094 en_US http://dx.doi.org/10.3982/te1156 Theoretical Economics http://creativecommons.org/licenses/by-nc/3.0/ application/pdf The Econometric Society The Econometric Society |
| spellingShingle | Angeletos, George-Marios Pavan, Alessandro Selection-free predictions in global games with endogenous information and multiple equilibria |
| title | Selection-free predictions in global games with endogenous information and multiple equilibria |
| title_full | Selection-free predictions in global games with endogenous information and multiple equilibria |
| title_fullStr | Selection-free predictions in global games with endogenous information and multiple equilibria |
| title_full_unstemmed | Selection-free predictions in global games with endogenous information and multiple equilibria |
| title_short | Selection-free predictions in global games with endogenous information and multiple equilibria |
| title_sort | selection free predictions in global games with endogenous information and multiple equilibria |
| url | http://hdl.handle.net/1721.1/83253 https://orcid.org/0000-0002-9269-5094 |
| work_keys_str_mv | AT angeletosgeorgemarios selectionfreepredictionsinglobalgameswithendogenousinformationandmultipleequilibria AT pavanalessandro selectionfreepredictionsinglobalgameswithendogenousinformationandmultipleequilibria |