Common belief foundations of global games

Abstract

© 2016 Elsevier Inc.. We study coordination games under general type spaces. We characterize rationalizable actions in terms of the properties of the belief hierarchies and show that there is a unique rationalizable action played whenever there is approximate common certainty of rank beliefs, defined as the probability the players assign to their payoff parameters being higher than their opponents'. We argue that this is the driving force behind selection results for the specific type spaces in the global games literature.