Multiplicity, instability and sunspots in games. (Q1398438)

This paper considers a game \(\Gamma\) with two players and establishes a sufficient condition on a Nash equilibrium \(x\) in pure strategies for the existence of other Nash equilibria in pure strategies, for the existence of non-trivial correlated equilibria arbitrarily close to \(x\) and moreover for \(x\) to be a non-isolated profile of rationalizable strategies. The author shows that if there exist multiple Nash equilibria in pure strategies of the game \(\Gamma,\) then there exist a continuum of non-trivial correlated equilibria arbitrarily close to some Nash equilibrium in pure strategies also and the set of rationalizable profiles of strategies has no isolated point. Finally the author establishes that if there exists a nontrivial correlated equilibrium of \(\Gamma\) and the best reply functions \(r_{i}\) are both non-decreasing or both non-increasing, then there exist multiple Nash equilibria in pure strategies. This paper provides global links between multiplicity, instability and sunspots. See also \textit{J. Peck} and \textit{K. Shell} [Rev. Econ. Stud. 58, 1011--1029 (1991; Zbl 0742.90024)] and \textit{J. Peck, K. Shell} and \textit{S. E. Spear} [J. Math. Econ. 21, 271--299 (1992; Zbl 0762.90011)].