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Fear of Miscoordination and the Robustness of Cooperation in Dynamic Global Games With Exit

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  • Sylvain Chassang

Abstract

This paper develops a framework to assess how fear of miscoordination affects the sustainability of cooperation. Building on theoretical insights from Carlsson and van Damme (1993), it explores the effect of small amounts of private information on a class of dynamic cooperation games with exit. Lack of common knowledge leads players to second guess each other's behavior and makes coordination difficult. This restricts the range of equilibria and highlights the role of miscoordination payoffs in determining whether cooperation is sustainable or not. The paper characterizes the range of perfect Bayesian equilibria as the players' information becomes arbitrarily precise. Unlike in one-shot two-by-two games, the global games information structure does not yield equilibrium uniqueness. Copyright 2010 The Econometric Society.

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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 78 (2010)
Issue (Month): 3 (05)
Pages: 973-1006

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Handle: RePEc:ecm:emetrp:v:78:y:2010:i:3:p:973-1006

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Cited by:
  1. Sylvain Chassang & Gerard Padró i Miquel, 2010. "Conflict and Deterrence under Strategic Risk," The Quarterly Journal of Economics, MIT Press, vol. 125(4), pages 1821-1858, November.
  2. Dong Beom Choi, 2013. "Heterogeneity and stability: bolster the strong, not the weak," Staff Reports 637, Federal Reserve Bank of New York.
  3. Guillermo Ordonez, 2008. "Fragility of Reputation and Clustering in Risk Taking," 2008 Meeting Papers 441, Society for Economic Dynamics.
  4. Łukasz Balbus & Kevin Reffett & Łukasz Woźny, 2013. "Markov Stationary Equilibria in Stochastic Supermodular Games with Imperfect Private and Public Information," Dynamic Games and Applications, Springer, vol. 3(2), pages 187-206, June.
  5. Frankel, David M., 2014. "Optimal Insurance for Small Stakeholders," Staff General Research Papers 37551, Iowa State University, Department of Economics.
  6. David M. Frankel, 2010. "Rent Seeking and Economic Fragility," Levine's Bibliography 661465000000000159, UCLA Department of Economics.
  7. GUIMARAES, Bernardo & ARAUJO, Luis, 2013. "The effect of options on coordination," Textos para discussão 324, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  8. George-Marios Angeletos & Alessandro Pavan, 2012. "Selection-Free Predictions in Global Games with Endogenous Information and Multiple Equilibria," Discussion Papers 1570, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Embrey Matthew & Mengel Friederike & Peeters Ronald, 2012. "Strategic commitment and cooperation in experimental games of strategic complements and substitutes," Research Memorandum 052, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  10. Laurent Mathevet & Jakub Steiner, 2012. "Sand in the Wheels: A Dynamic Global-Game Approach," CERGE-EI Working Papers wp459, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  11. Christopher Bidner & Ken Jackson, 2011. "Trust and Vulnerability," Discussion Papers 2012-09, School of Economics, The University of New South Wales.
  12. David McAdams, 2011. "Performance and Turnover in a Stochastic Partnership," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 107-42, November.
  13. Mathevet, Laurent & Steiner, Jakub, 2013. "Tractable dynamic global games and applications," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2583-2619.
  14. Gregory Fischer, 2011. "Contract structure, risk sharing and investment choice," LSE Research Online Documents on Economics 41890, London School of Economics and Political Science, LSE Library.

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