Definition

Define best response function BR(s1,s2,...,sN)=(BR1(s1),...,BRN(sN))BR(s_1, s_2, ..., s_N) = (BR_1(s_{-1}),...,BR_N(s_{-N})), BR:SSBR : S \to S, where S=S1×S2×...×SNS = S_1 \times S_2 \times ... \times S_N.

BRi(si)BR_i(s_{-i}) is the set of maximizers of the continuous function ui(,si)u_i(\cdot, s_{-i}) on the compact set sis_i. \implies existence by Weierstrass theorem

Lemma

If the sets S1,...,SNS_1, ..., S_N are nonempty sets, SiS_i, iNi \in N, compact and convex, and ui()u_i(\cdot) is continuous in (s1,...,sn)(s_1,...,s_n) and concave in siSis_i \in S_i, then BRi()BR_i(\cdot) (best response function) is nonempty, convex-valued, and u.h.c.

By the lemma, BR()BR(\cdot) is nonempty, convex-valued, u.h.c.,
Kakutani fixed-point theorem says \exists a fixed point sBR(s)siBRi(si)ui(si,si)ui(si,si)siSis \in BR(s) \iff s_i \in BR_i(s_{-i}) \iff u_i(s_i,s_{-i}) \geq u_i(s_i', s_{-i}) \quad \forall s_i \in S_i.


References

  1. https://web.stanford.edu/~rjohari/teaching/notes/246_lecture7_2007.pdf