Uniqueness and stability in symmetric games: Theory and Applications Andreas M. Hefti∗ November 2013 Abstract This article develops a comparably simple approach towards uniqueness of pure- strategy equilibria in symmetric games with potentially many players by separating be- tween multiple symmetric equilibria and asymmetric equilibria. Our separation approach is useful in applications for investigating, for example, how different parameter constel- lations may affect the scope for multiple symmetric or asymmetric equilibria, or how the equilibrium set of higher-dimensional symmetric games depends on the nature of the strategies. Moreover, our approach is technically appealing as it reduces the complexity of the uniqueness-problem to a two-player game, boundary conditions are less critical compared to other standard procedures, and best-replies need not be everywhere differ- entiable. The article documents the usefulness of the separation approach with several examples, including applications to asymmetric games and to a two-dimensional price- advertising game, and discusses the relationship between stability and multiplicity of symmetric equilibria. Keywords: Symmetric Games, Uniqueness, Symmetric equilibrium, Stability, Indus- trial Organization JEL Classification: C62, C65, C72, D43, L13 ∗Author affiliation: University of Zurich, Department of Economics, Bluemlisalpstr. 10, CH-8006 Zurich. E-mail:
[email protected], Phone: +41787354964. Part of the research was accomplished during a research stay at the Department of Economics, Harvard University, Littauer Center, 02138 Cambridge, USA. 1 1 Introduction Whether or not there is a unique (Nash) equilibrium is an interesting and important question in many game-theoretic settings. Many applications concentrate on games with identical players, as the equilibrium outcome of an ex-ante symmetric setting frequently is of self-interest, or comparably easy to handle analytically, especially in presence of more than two players.