Abstract
In this chapter, we introduce notions of payoff dominance and risk dominance, explain their meanings, and also extend the risk dominance concept to p-dominance. In addition, we illustrate how equilibrium selection is performed using the example of global games, which is relevant to many economic situations.
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Notes
- 1.
The origin of this game is said to be Rousseau’s book, Discourse on the Origin and Basis of Inequality among Men (1755).
- 2.
We follow the definition by Carlsson and van Damme [1] for later references. There is another definition using the opposite subtraction, but for the product of the unitary deviation losses, the signs are irrelevant.
- 3.
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Fujiwara-Greve, T. (2015). Equilibrium Selection\(^{*}\) . In: Non-Cooperative Game Theory. Monographs in Mathematical Economics, vol 1. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55645-9_9
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DOI: https://doi.org/10.1007/978-4-431-55645-9_9
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