Single crossing properties and the existence of pure strategy equilibria in games of incomplete information. (English) Zbl 1019.91006
Summary: This paper analyzes a class of games of incomplete information where each agent has private information about her own type, and the types are drawn from an atomless joint probability distribution. The main result establishes existence of pure strategy Nash equilibria (PSNE) under a condition we call the single crossing condition (SCC), roughly described as follows: whenever each each opponent uses a nondecreasing strategy (in the sense that higher types choose higher actions), a player’s best response strategy is also nondecreasing. When the SCC holds, a PSNE exists in every finite-action game. Further, for games with continuous payoffs and a continuum of actions, there exists a seequence of PSNE to finite-action games that converges to a PSNE of the continuum-action game. These convergence and existence results also extend to some clases of games with discontinuous payoffs, such as first-price auctions, where bidders may be heterogeneous and reserve prices are permitted. Finally, the paper characterizes the SCC based on properties of utility functions and probability distributions over types. Applications include first-price, multi-unit, and all-pay auctions; pricing games with incomplete information about costs; and noisy signaling games.
MSC:
91A18 | Games in extensive form |
91B26 | Auctions, bargaining, bidding and selling, and other market models |
91B44 | Economics of information |
91A28 | Signaling and communication in game theory |