Interactions with hidden complementarities

Coralio Ballester, Antoni Calvó-Armengol

    Research output: Contribution to journalArticleResearchpeer-review

    18 Citations (Scopus)

    Abstract

    We consider a finite population simultaneous move game with heterogeneous interaction modes across different pairs of players. We allow for general interaction patterns, but restrict our analysis to games whose pure strategy Nash equilibrium conditions boil down to a set of piece-wise linear conditions, so that an equilibrium is a solution to a linear complementarity problem.We introduce a new class of games for which a suitable linear transformation of the original interaction matrix induces a game with complementarities. We provide general moderation conditions on the interaction matrix such that a game in this class has a unique Nash equilibrium, that we are able to characterize by means of a closed-form expression involving a generalized version of the Katz network measure of node centrality. © 2010 Elsevier B.V.
    Original languageEnglish
    Pages (from-to)397-406
    JournalRegional Science and Urban Economics
    Volume40
    Issue number6
    DOIs
    Publication statusPublished - 1 Nov 2010

    Keywords

    • Complementarity
    • Interaction matrix
    • Linear complementarity problem
    • Moderation
    • Nash equilibrium
    • Uniqueness

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