Global Games in Ames 2016

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08-04-16 to 09-04-16
United States
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Global Games in Ames 2016, a conference in economic theory, will take place in the Economics Dept. at Iowa State University. Global games are a relatively new approach to using economic theory to make predictions in collective action problems. In a collective action problem, a set of agents choose whether or not to take an action, where an agent’s benefit from taking the action is higher if other agents also do so.

Many economic interactions fit this description. A few examples are as follows.

  • Joint Ventures. A group of investors choose whether or not to invest in a joint venture, where the project is more likely to succeed if more investors participate.
  • Computer Platforms. A group of firms or households choose whether or not to adopt a computer platform, where the success of the platform is more likely if it is more widely adopted.
  • Bank Runs. A group of small depositors choose whether or not to leave their money in a bank, where the bank will remain solvent only if enough depositors remain loyal.
  • Business Cycles. The firms in an economy simultaneously choose whether or not to hire new workers, where the payoff to hiring is greater if more firms hire since then there will be more consumers with enough money to buy the firms' products.

Collective action problems raise interesting theoretical issues. First, they typically have two equilibria (stable outcomes): one in which all agents invest, and another in which no agents invest. This multiplicity makes prediction difficult. Thus, there is an interest in finding modelling approaches that can yield a unique equilibrium. Second, when there are two equilibria, the one in which more agents invest is typically better for the agents (Pareto dominant). This raises the question of whether there are cheap public interventions that can lead the agents to choose the good equilibrium.

Developed by Paolo Gittoi