Department of Economics
New York University

DOUGLAS GALE

TOPICS IN ECONOMICS:

COORDINATION AND LEARNING

Fall 2000

READING LIST

A. COORDINATION GAMES

I. Background reading

General references

Cooper, Russell (1998) Coordination Games: Complementarities and Macroeconomics. Cambridge, New York and Melbourne: Cambridge University Press.

An excellent survey of theory and macroeconomic applications.

Vives, Xavier (1999) Oligopoly Pricing: Old Ideas and New Tools. Cambridge, MA and London: MIT Press.

Chapter 2 has a thorough discussion of supermodular games and strategic complementarities.

Examples of strategic complementarities

Blanchard, O. and N. Kiyotaki (1987) "Monopolistic Competition and the Effect of Aggregate Demand," American Economic Review 77, 647-666.

Bolton, P. and J. Farrell (1990) "Decentralization, Duplication and Delay" Journal of Political Economy 98, 801-826.

Bryant, J. (1983) "A Simple Rational Expectations Keynes-Type Model" Quarterly Journal of Economics 97, 525-529.

Chatterjee, S., R. Cooper, and B. Ravikumar (1993) "Strategic Complementarity in Business Fromation: Aggregate Fluctuations and Sunspot Equilibria," Review of Economic Studies 60, 795-811.

Chatterjee, S. and R. Cooper (1989): "Multiplicity of Equilibria and Fluctuations in Dynamic Perfectly Competitive Economies," American Economic Association Papers and Proceedings 79, 353-357.

Cooper, R. and A. John (1988) "Coordinating Coordination Failures in a Keynesian Model," Quarterly Journal of Economics 103, 441-464.

Diamond, P. (1982) "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy 90, 881-894.

Durlauf, S. (1993) "Non-Ergodic Growth Theory," Review of Economic Studies 60, 349-366.

Farrell, J. and G. Saloner (1985) "Standardization, Compatibility and Innovation" RAND Journal of Economics 16, 70-83.

Farrell, J. (1987) "Cheap Talk, Coordination and Delay," RAND Journal of Economics 18, 34-39.

Farrell, J. and G. Saloner (1988) "Coordination through Committees and Markets," RAND Journal of Economics 19, 235-252.

Farrell, J. (1993) "Choosing the Rules for Formal Standardization," UC Berkeley (unpublished).

Heller, W. (1986) "Coordination Failure Under Complete Markets with Applications to Effective Demand," in Heller, W., Starr, R., Starrett, D. (eds.): Equilibrium Analysis: Essays in Honor of Kenneth J. Arrow Vol. II. Cambridge: Cambridge University Press 1986.

Kiyotaki, N. (1988) "Multiple Expectational Equilibria under Monopolistic Competition," Quarterly Journal of Economics 103, 695-713.

Krugman, P. (1991) "History versus Expectations," Quarterly Journal of Economics 106, 651-667.

Mariotti, M. (1992): "Unused Innovations," Economics Letters 38, 367-371.

Matsuyama, K. (1991) "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Quarterly Journal of Economics 106, 617-650.

Matsuyama, K. (1995) "Complementarities and Cumulative Processes in Models of Monopolistic Competition: A Survey," Journal of Economic Literature 33, 701-729.

Shleifer, A. (1986) "Implementation Cycles," Journal of Political Economy 94, 1163-1190.

II. Supermodular games

Milgrom, P. and J. Roberts (1990) “Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities,” Econometrica 58, 1255-1278.

Topkis, D. (1979) “Equilibrium Points in Non-Zero Sum n-Person Submodular Games,” SIAM Journal of Control and Optimization 17, 773-787.

Vives, X. (1990) “Nash Equilibrium with Strategic Complementarities,” Journal of Mathematical Economics 19, 305-321.

III. Dynamic coordination games

Gale, D. (1995) "Dynamic Coordination Games," Economic Theory 5, 1-18.

Gale, D. (1996) “Delay and Cycles,” Review of Economic Studies 63, 169-198.

Gale, D. (1997, revised 2000) “Monotone Games,” unpublished.

IV. Selection in coordination games

Aumann, R. and S. Sorin (1989) “Cooperation and Bounded Recall,” Games and Economic Behavior 1, 5-39.

Carlsson, Hans and E. van Damme (1993) “Global Games and Equilibrium Selection,” Econometrica 61, 989-1018.

Lagunoff, R. and A. Matsui (1997) “An "Anti-Folk Theorem" for a Class of Asynchronously Repeated Games,” Econometrica 65, 1467-77.

Morris, Stephen, R. Rob, and H.S. Shin (1995) “Dominance and Belief Potential,” Econometrica 63, 145-57.

Morris, S. and H. Shin (1998) "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review 88, 587-97.

B. LEARNING IN MARKETS AND GAMES

I. Herd behavior and social learning

Models of herd behavior

Banerjee, A. (1992) "A Simple Model of Herd Behavior," Quarterly Journal of Economics 107, 797-817.

Bikhchandani, S., D. Hirshleifer and I. Welch (1992) "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades," Journal of Political Economy 100, 992-1026.

Lee, I.-H. (1993) "On the Convergence of Informational Cascades," Journal of Economic Theory 61, 395-411.

Gale, D. (1996) "What Have We Learned from Social Learning?" European Economic Review 40, 617-628.

Scharfstein, David and Jeremy Stein (1990) "Herd Behavior and Investment," American Economic Review 80, 465-79.

Moscarini, G, M. Ottaviani and L. Smith (1998) "Learning in a Changing World," Economic Theory 11, 657-65.

Dasgupta, A. (2000) "Social Learning with Payoff Complementarities," unpublished.

Martingale methods

Smith, L. and P. Sorensen (1995) "A Theory of Rational Social Learning," unpublished.

Smith, L. and P. Sorensen (1996) "Pathological Outcomes of Observational Learning," unpublished.

Smith, L. and P. Sorensen (1996) "Informational Herding as Experimentation Deja Vu," unpublished.

Learning with endogenous timing

Chamley, C. and D. Gale (1994) "Information Revelation and Strategic Delay in a Model of Investment," Econometrica 62, 1065-1085.

Glazer, J. and A. Rubinstein (1994) "The Design of Organizations for Collecting Information from Conformist Agents," unpublished.

Gul, F. and R. Lundholm (1992) "Endogenous Timing and the Clustering of Agents' Decisions," Journal of Political Economy 103, 1039-1066.

Neeman, Z. and Orosel (1999) "Herding and the Winner's Curse in Markets with Sequential Bids," Journal of Economic Theory 85, 91-121.

II. Learning in financial markets

Market microstructure

Avery, C. and P. Zemsky (1998) ''Multi-dimensional Uncertainty and Herd Behavior in Financial Markets,'' American Economic Review 88, 724-48.

Burguet, R. and X. Vives (1996) "Social Learning and Costly Information Acquisition," unpublished.

Glosten, L. and P. Milgrom (1985) ''Bid, Ask and Transaction Prices in a Specialist Market with Hetergeneously Informed Traders,'' Journal of Financial Economics 14, 71-100.

Kyle, A. (1985) "Continuous Auctions and Insider Trading," Econometrica 53, 1315-1335.

Smith, L. (1995) "Do Rational Traders Frenzy?" unpublished.

Rational expectations equilibrium

Vives, X. (1993) "How Fast Do Rational Agents Learn?" Review of Economic Studies 60, 329-348.

Vives, X. (1995) "Learning from Others: A Welfare Analysis," unpublished.

Vives, X. (1995) "The Speed of Information Revelation in a Financial Market Mechanism," Journal of Economic Theory 67, 178-204.

III. Information aggregation in auctions and elections

Feddersen, T. and W. Pesendorfer (1996) "The Swing Voter's Curse," American Economic Review 86, 408-24.

Feddersen, T. and W. Pesendorfer (1997) "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica 65, 1029-58.

Milgrom, P. (1979) "A Convergence Theorem for Competitive Bidding with Differential Information," Econometrica 47, 670-688.

Milgrom, P. (1981) "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica 49, 921-943.

Pesendorfer, W. and J. Swinkels (1997) "The Loser’s Curse and Information Aggregation in Common Value Auctions," Econometrica 65, 1247-81.

Wilson, R. (1977) "A Bidding Model of Perfect Competition," Review of Economic Studies 44, 511-518.

Piketty, T. and S. Spector (1996) "Rational Debate Leads to One-Dimensional Conflict," unpublished.

IV. Bayesian learning in games

Blackwell, D. and L. Dubins (1962) "Merging of Opinions with Increasing Information," Annals of Mathematical Statistics 38, 882-886.

Feldman, M. (1991) "On the Generic Non-Convergence of Bayesian Actions and Beliefs," Economic Theory 1, 301-321.

Jackson, M. and E. Kalai (1997) "Social Learning in Recurring Games," Games and Economic Behavior 21, 102-34.

Kalai, E. and E. Lehrer (1993) "Rational Learning Leads to Nash Equilibrium," Econometrica61, 1019-1045.

Kalai, E. and E. Lehrer (1994) "Weak and Strong Merging of Opinions," Journal of Mathematical Economics 23, 73-86.

Nachbar, J. (1997) "Prediction, Optimization, and Rational Learning in Games," Econometrica 65, 275-309.

V. Experimentation

Aghion, P., P. Bolton, C. Harris and B. Jullien (1991) "Optimal Learning by Experimentation," Review of Economic Studies 58, 621-654.

Bergemann, D. and J. Valimaki (1996) "Learning and Strategic Pricing," Econometrica64, 1125-1150.

Bergemann, D. and J. Valimaki (1996) "Market Experimentation and Pricing," Cowles Foundation Discussion Paper 1122.

Bolton, P. and C. Harris (1999) "Strategic Experimentation," Econometrica67, 349-74.

Easley, D. and N. Kiefer (1988) "Controlling a Stochastic Process with Unknown Parameters," Econometrica 56, 1045-1064.

McLennan, A. (1984) "Price Dispersion and Incomplete Learning in the Long Run," Journal of Economic Dynamics and Control 7, 331-347.

Rothschild, M. (1974) "A Two-Armed Bandit Theory of Market Pricing," Journal of Economic Theory 9, 185-202.

VI. Behavioral models of learning

Banerjee, A. and Fudenberg, D. (1996) "Word-of-Mouth Learning," unpublished.

Ellison, G. and D. Fudenberg (1993) "Rules of Thumb for Social Learning," Journal of Political Economy 101, 612-643.

Ellison, G. and D. Fudenberg (1995) "Word-of-Mouth Communication and Social Learning," Quarterly Journal of Economics 110, 93-125.

Fudenberg, D. and D. Kreps (1995) "Learning in Extensive-Form Games, I Self-Confirming Equilibria," Games and Economic Behavior 8, 20-55.

Fudenberg, D. and D. Kreps (1993) "Learning Mixed Equilibria," Games and Economic Behavior 5, 320-367.

Gale, D. and R. Rosenthal (1999) "Imitation, Experimentation, and Stochastic Stability," Journal of Economic Theory 84, 1-40.

Gale, D. and R. Rosenthal (2000) "Imitation, Experimentation, and Stochastic Stability: Addendum," Journal of Economic Theory (forthcoming).