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Abstract

We study coordination failures in many simultaneously occurring coordination problems. Players encounter one of the problems but have the outside option of migrating to one of the remaining ones. Drawing on the global games approach, we show that such a mobile game has a unique equilibrium that allows us to examine comparative statics. The endogeneity of the outside option value and of the migration activity leads to non-monotonicity of welfare with respect to mobility friction; high mobility may hurt players. We apply these "general equilibrium'' findings to the problem of the labor market during industrialization as described by Matsuyama [Increasing returns, industrialization and indeterminacy of equilibrium, Quart. J. Econ. 106 (1991) 617-650].

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 139 (2008)
Issue (Month): 1 (March)
Pages: 25-46

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Handle: RePEc:eee:jetheo:v:139:y:2008:i:1:p:25-46

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Web page: http://www.elsevier.com/locate/inca/622869

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Find related papers by JEL classification:

• C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
• D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
• D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

References

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1. Byeongju Jeong, 2003. "The Welfare Effects of Mobility Restrictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(3), pages 685-696, July.
2. George J. Mailath & Larry Samuelson & Avner Shaked, 1997. "Endogenous Interactions," CARESS Working Papres endo-one, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
3. Hans Carlsson & Eric van Damme, 1993. "Global Games and Equilibrium Selection," Levine's Working Paper Archive 122247000000001088, David K. Levine.
   
   • Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September.
   • Carlsson, H. & Van Damme, E., 1990. "Global Games And Equilibrium Selection," Papers 9052, Tilburg - Center for Economic Research.
   • 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.
   • Carlsson, H. & Damme, E.E.C. van, 1990. "Global games and equilibrium selection," Discussion Paper 1990-52, Tilburg University, Center for Economic Research.
4. Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
   
   • Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 617-50, May.
5. Kenneth Burdett & Ryoichi Imai & Randall Wright, 2004. "Unstable Relationships," The B.E. Journal of Macroeconomics, De Gruyter, vol. 0(1), pages 1.
6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
   
   • Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
7. Stephen Morris & Hyun Song Shin, 1999. "Coordination Risk and the Price of Debt," Cowles Foundation Discussion Papers 1241, Cowles Foundation for Research in Economics, Yale University.
   
   • Morris, Stephen & Shin, Hyun Song, 2004. "Coordination risk and the price of debt," European Economic Review, Elsevier, vol. 48(1), pages 133-153, February.
   • Stephen Morris & Hyun Song Shin, 1999. "Coordination Risk and the Price of Debt," Cowles Foundation Discussion Papers 1241R, Cowles Foundation for Research in Economics, Yale University, revised Feb 2002.
   • Hyun Song Shin & Stephen Morris, 2001. "Coordination Risk and the Price of Debt," FMG Discussion Papers dp373, Financial Markets Group.
8. Kandori, M. & Mailath, G.J., 1991. "Learning, Mutation, And Long Run Equilibria In Games," Papers 71, Princeton, Woodrow Wilson School - John M. Olin Program.
   
   • Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
   • M. Kandori & G. Mailath & R. Rob, 1999. "Learning, Mutation and Long Run Equilibria in Games," Levine's Working Paper Archive 500, David K. Levine.
9. Jakub Steiner, 2006. "Coordination in a Mobile World," CERGE-EI Working Papers wp295, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
10. Joerg Oechssler, 1994. "Decentralization and the Coordination Problem," Game Theory and Information 9403004, EconWPA.
    
    • Oechssler, Jorg, 1997. "Decentralization and the coordination problem," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 119-135, January.
11. Jakub Steiner, 2005. "Coordination Cycles," CERGE-EI Working Papers wp274, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
    
    • Steiner, Jakub, 2008. "Coordination cycles," Games and Economic Behavior, Elsevier, vol. 63(1), pages 308-327, May.
    • Jakub Steiner, 2006. "Coordination Cycles," ESE Discussion Papers 162, Edinburgh School of Economics, University of Edinburgh.
12. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica, Econometric Society, vol. 72(5), pages 1583-1599, 09.

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Cited by:

1. Flavio Toxvaerd & Chryssi Giannitsarou, 2004. "Recursive global games," Money Macro and Finance (MMF) Research Group Conference 2003 104, Money Macro and Finance Research Group.
   
   • Giannitsarou, Chryssi & Toxvaerd, Flavio, 2007. "Recursive Global Games," CEPR Discussion Papers 6470, C.E.P.R. Discussion Papers.
2. Junichi Fujimoto, 2011. "Speculative Attacks with Multiple Targets," CARF F-Series CARF-F-267, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
3. Sylvain Chassang & Gerard Padro i Miquel, 2008. "Conflict and Deterrence under Strategic Risk," NBER Working Papers 13964, National Bureau of Economic Research, Inc.
   
   • 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.
4. Peter R. Mueser & David Mandy & Eric Parsons, 2011. "Population Population Movements in the Presence of Agglomeration and Congestion Effects: Local Policy and the Social Optimum," Working Papers 1123, Department of Economics, University of Missouri.

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