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Ordinal potentials in smooth games


Ewerhart, Christian (2018). Ordinal potentials in smooth games. Working paper series / Department of Economics 265, University of Zurich.

Abstract

A non-cooperative n-player game is called smooth if strategy spaces are non-degenerate compact intervals and payoff functions are twice continuously differentiable. In the class of smooth games, exact potential games are known to admit a convenient characterization in terms of cross-derivatives (Monderer and Shapley, 1996a). This characterization extends easily to weighted potential games. However, no analogous characterization is known for ordinal potential games. The present paper derives simple necessary conditions for a smooth game to admit an ordinal potential. First, any ordinal potential game must exhibit pairwise strategic complements or substitutes at any interior equilibrium. Second, in games with more than two players, a condition is obtained on the (modified) Jacobian at any interior equilibrium. Taken together, these conditions are shown to correspond to a local analogue of the Monderer-Shapley condition for weighted potential games. We identify two classes of economic games for which our necessary conditions are also sufficient.

Abstract

A non-cooperative n-player game is called smooth if strategy spaces are non-degenerate compact intervals and payoff functions are twice continuously differentiable. In the class of smooth games, exact potential games are known to admit a convenient characterization in terms of cross-derivatives (Monderer and Shapley, 1996a). This characterization extends easily to weighted potential games. However, no analogous characterization is known for ordinal potential games. The present paper derives simple necessary conditions for a smooth game to admit an ordinal potential. First, any ordinal potential game must exhibit pairwise strategic complements or substitutes at any interior equilibrium. Second, in games with more than two players, a condition is obtained on the (modified) Jacobian at any interior equilibrium. Taken together, these conditions are shown to correspond to a local analogue of the Monderer-Shapley condition for weighted potential games. We identify two classes of economic games for which our necessary conditions are also sufficient.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C6, C72, D43, D72
Uncontrolled Keywords:Ordinal potentials, smooth games, strategic complements and substitutes, semipositive matrices
Language:English
Date:July 2018
Deposited On:17 Oct 2017 14:58
Last Modified:29 Jul 2018 05:25
Series Name:Working paper series / Department of Economics
Number of Pages:31
ISSN:1664-7041
Additional Information:Revised version
OA Status:Green
Official URL:http://www.econ.uzh.ch/static/wp/econwp265.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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