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Reversibility in dynamic coordination problems

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  • Kováč, Eugen
  • Steiner, Jakub

Abstract

We study a dynamic coordination process in which agents are uncertain about the actions of their fellow agents, and anticipate strategically relevant information. Because of the uncertainty and learning, (ir)reversibility of actions has important strategic consequences. We find that the reversibility option can either enhance or hamper efficient coordination, and we characterize the direction of the effect based solely on simple features of the coordination problem. The analysis is based on the following generalization of the Laplacian property known from static global games: agents at the beginning of the dynamic game act as if they were entirely uninformed about the aggregate play of fellow agents in each stage of the coordination process.

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Bibliographic Info

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

Volume (Year): 77 (2013)
Issue (Month): 1 ()
Pages: 298-320

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Handle: RePEc:eee:gamebe:v:77:y:2013:i:1:p:298-320

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

Related research

Keywords: Delay; Exit; Global games; Laplacian belief; Learning; Option; Reversibility;

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Citations

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Cited by:
  1. Araujo, Luis & Guimarães, Bernardo, 2013. "The effect of options on coordination," CEPR Discussion Papers 9294, C.E.P.R. Discussion Papers.
  2. 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.
  3. Mathevet, Laurent & Steiner, Jakub, 2013. "Tractable dynamic global games and applications," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2583-2619.
  4. Kováč, Eugen & Steiner, Jakub, 2013. "Reversibility in dynamic coordination problems," Games and Economic Behavior, Elsevier, vol. 77(1), pages 298-320.

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