Threshold policy for global games with noisy information sharing

Abstract

It is known that global games with noisy sharing of information do not admit a certain type of threshold policies [1]. Motivated by this result, we investigate the existence of threshold-type policies on global games with noisy sharing of information and show that such equilibrium strategies exist and are unique if the sharing of information happens over a sufficiently noisy environment. To show this result, we establish that if a threshold function is an equilibrium strategy, then it will be a solution to a fixed point equation. Then, we show that for a sufficiently noisy environment, the functional fixed point equation leads to a contraction mapping, and hence, its iterations converge to a unique continuous threshold policy.