Abstract
The value of a game is the payoff a player can expect (ex ante) from playing the game. Understanding how the value changes with economic primitives is critical for policy design and welfare. However, for games with multiple equilibria, the value is difficult to determine. We therefore develop a new theory of the value of coordination games. The theory delivers testable comparative statics on the value and delivers novel insights relevant to policy design. For example, policies that shift behavior in the desired direction can make everyone worse off, and policies that increase everyone's payoffs can reduce welfare.
| Original language | English |
|---|---|
| Article number | 105419 |
| Pages (from-to) | 1-44 |
| Number of pages | 44 |
| Journal | Journal of Economic Theory |
| Volume | 201 |
| Early online date | 7 Feb 2022 |
| DOIs | |
| Publication status | Published - Apr 2022 |
Bibliographical note
Funding Information:We are grateful to the Associate Editor and two anonymous referees for excellent suggestions. We thank Larbi Alaoui, Miguel Ballester, Larry Blume, Vincent Crawford, David Gill, Meg Meyer, Antonio Penta, David Schmeidler, Jakub Steiner, Colin Stewart, and numerous seminar audiences for helpful comments and stimulating discussions. Luzia Bruckamp provided excellent research assistance.
Publisher Copyright:
© 2022 Elsevier Inc.
Funding
We are grateful to the Associate Editor and two anonymous referees for excellent suggestions. We thank Larbi Alaoui, Miguel Ballester, Larry Blume, Vincent Crawford, David Gill, Meg Meyer, Antonio Penta, David Schmeidler, Jakub Steiner, Colin Stewart, and numerous seminar audiences for helpful comments and stimulating discussions. Luzia Bruckamp provided excellent research assistance.
Keywords
- Comparative statics on welfare
- Coordination
- Policy design
- Strategic complementarities
- Supermodular games
- Value