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Supermodular


In mathematics, a function

is supermodular if

for all x, y Rk, where x y denotes the componentwise maximum and x y the componentwise minimum of x and y.

If −f is supermodular then f is called submodular, and if the inequality is changed to an equality the function is modular.

If f is twice continuously differentiable, then supermodularity is equivalent to the condition

The concept of supermodularity is used in the social sciences to analyze how one agent's decision affects the incentives of others.

Consider a symmetric game with a smooth payoff function defined over actions of two or more players . Suppose the action space is continuous; for simplicity, suppose each action is chosen from an interval: . In this context, supermodularity of implies that an increase in player 's choice increases the marginal payoff of action for all other players . That is, if any player chooses a higher , all other players have an incentive to raise their choices too. Following the terminology of Bulow, Geanakoplos, and Klemperer (1985), economists call this situation strategic complementarity, because players' strategies are complements to each other. This is the basic property underlying examples of multiple equilibria in coordination games.


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