Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97244
Authors: 
Angeletos, George-Marios
Pavan, Alessandro
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1570
Abstract: 
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 could not have been 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 non-equilibrium 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.
Subjects: 
global games
multiple equilibria
endogenous information
robust predictions
JEL: 
C7
D8
E5
E6
F3
Document Type: 
Working Paper

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