Using a simple framework of Cooper and John (1988) and Cooper (1999), this paper derives the conditions under which overconfidence and underconfidence of agents lead to Pareto improvement. We show that an agent’s overconfidence in a game exhibiting strategic complementarity and positive...

In this paper we develop a fully game-theoretic version of the right-to-manage model of firm-level bargaining where strategic interactions among firms are explicitly recognized. Our main aim is to investigate how equilibrium wages and employment react to changes in the labour and product...

Intuitively, we might think that a multiproducts company which has the possibility to forecast the structure of demand does not need to protect itself against risks of stock shortages due to the variability of the characteristics of demand since this becomes foreseeable. Symmetrically, it seems...

In a setting where an infinite population of players interact locally and repeatedly, we study the impacts of payoff structures and network structures on contagion of a convention beyond 2×2 coordination games. First, we consider the “bilingual game”, where each player chooses one of two...

We consider agents playing a linear network game with strategic complementarities. We analyse the problem of a policy maker who can change the structure of the network in order to increase the aggregate efforts of the individuals and/or the sum of their utilities, given that the number of links...

The literature on supermodular optimization and games is surveyed from the perspective of potential users in economics. This methodology provides a new approach for comparative statics based only on critical assumptions, and allows a general analysis of games with strategic complementarities....

This paper discusses the value of information in games with state contingent payoffs, using a simple two-stage duopoly model. In the first stage, each duopolist simultaneously chooses whether to observe the market demand, which is either high or low. The second stage game is an ordinary...

This paper studies a dynamic adjustment process in a large society of forward-looking agents where payoffs are given by a normal form supermodular game. The stationary states of the dynamics correspond to the Nash equilibria of the stage game. It is shown that if the stage game has a monotone...

This paper develops a simple model in which a social hierarchy emerges endogenously when agents form a network for complementary interaction (``activity''). Specifically, we assume that agents are ex ante identical and their best response activity, as well as their value function, increases...

The beauty-contest framework of Morris and Shin (2002) is extended to allow sub-groups within the population of agents to differ in the quality (i.e. precision) of their private information. We discuss the inefficiency of the resulting model's equilibrium, and assess the relative effectiveness...