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Dynamic coordination with individual learning

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  • Dasgupta, Amil
  • Steiner, Jakub
  • Stewart, Colin

Abstract

We study coordination in dynamic global games with private learning. Players choose whether and when to invest irreversibly in a project whose success depends on its quality and the timing of investment. Players gradually learn about project quality. We identify conditions on temporal incentives under which, in sufficiently long games, players coordinate on investing whenever doing so is not dominated. Roughly speaking, this outcome occurs whenever playersʼ payoffs are sufficiently tolerant of non-simultaneous coordination. We also identify conditions under which players coordinate on the risk-dominant action. We provide foundations for these results in terms of higher order beliefs.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 74 (2012)
Issue (Month): 1 ()
Pages: 83-101

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Handle: RePEc:eee:gamebe:v:74:y:2012:i:1:p:83-101

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Coordination; Global games; Learning; Common knowledge; Delay;

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References

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  1. Gale, Douglas, 1995. "Dynamic Coordination Games," Economic Theory, Springer, vol. 5(1), pages 1-18, January.
  2. Martin W. Cripps & Jeffrey C. Ely & George J. Mailath & Larry Samuelson, 2007. "Common Learning," PIER Working Paper Archive 07-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Martin W. Cripps & Jeffrey C. Ely & George J. Mailath & Larry Samuelson, 2008. "Common Learning," Econometrica, Econometric Society, vol. 76(4), pages 909-933, 07.
  3. Carlsson, H. & Damme, E.E.C. van, 1993. "Global games and equilibrium selection," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154416, Tilburg University.
  4. Heidhues, Paul & Nicolas Melissas, 2003. "Equilibria in a Dynamic Global Game: The role of cohort effects," Royal Economic Society Annual Conference 2003 104, Royal Economic Society.
  5. Monderer, Dov & Samet, Dov, 1989. "Approximating common knowledge with common beliefs," Games and Economic Behavior, Elsevier, vol. 1(2), pages 170-190, June.
  6. Stephen Morris & Hyun Song Shin, 2007. "Common Belief Foundations of Global Games," Levine's Bibliography 122247000000001638, UCLA Department of Economics.
  7. Dasgupta, Amil, 2007. "Coordination and delay in global games," Journal of Economic Theory, Elsevier, vol. 134(1), pages 195-225, May.
  8. Itay Goldstein & Emre Ozdenoren & Kathy Yuan, 2011. "Learning and Complementarities in Speculative Attacks," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 263-292.
  9. Ivan Werning & George-Marios Angeletos, 2005. "Crises and Prices: Information Aggregation, Multiplicity and Volatility," 2005 Meeting Papers 284, Society for Economic Dynamics.
  10. Christophe Chamley, 2003. "Dynamic Speculative Attacks," American Economic Review, American Economic Association, vol. 93(3), pages 603-621, June.
  11. George-Marios Angeletos & Alessandro Pavan, 2007. "Dynamic Global Games of Regime Change: Learning, Multiplicity and Timing of Attacks," Discussion Papers 1497, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2007. "Dynamic Global Games of Regime Change: Learning, Multiplicity, and the Timing of Attacks," Econometrica, Econometric Society, vol. 75(3), pages 711-756, 05.
  13. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July.
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Cited by:
  1. Eugen Kovac & Jakub Steiner, 2008. "Reversibility in Dynamic Coordination Problems," ESE Discussion Papers 183, Edinburgh School of Economics, University of Edinburgh.
  2. Chong Huang, 2011. "Defending Against Speculative Attacks: Reputation, Learning, and Coordination," PIER Working Paper Archive 11-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. John Duffy, 2009. "Equilibrium Selection in Static and Dynamic Entry Games," Working Papers 376, University of Pittsburgh, Department of Economics, revised Dec 2011.

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