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Overcoming the coordination problem: Dynamic formation of networks

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  • Ochs, Jack
  • Park, In-Uck

Abstract

We analyze a multi-period entry game among privately informed agents who differ with respect to the number of agents who must enter in order for their own entry to be profitable. In each period agents who have not yet joined decide whether to subscribe to a network. There exists a unique equilibrium that approximates any symmetric equilibrium arbitrarily closely as the discount factor approaches one. This resolves the coordination problem. Ex-post efficiency is necessarily achieved asymptotically as the population size grows large. These results do not hold if subscribers can reverse their decisions without cost.

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Bibliographic Info

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

Volume (Year): 145 (2010)
Issue (Month): 2 (March)
Pages: 689-720

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:2:p:689-720

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

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Keywords: Strategic complementarity Network externality Coordination;

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References

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Citations

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Cited by:
  1. Masaki Aoyagi, 2005. "Optimal Sales Schemes against Interdependent Buyers," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0645, Institute of Social and Economic Research, Osaka University.
  2. Alexei Parakhonyak & Nick Vikander, 2013. "Optimal sales schemes for network goods," HSE Working papers, National Research University Higher School of Economics WP BRP 41/EC/2013, National Research University Higher School of Economics.
  3. Heggedal, Tom-Reiel & Helland, Leif, 2014. "Platform selection in the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 168-177.
  4. Gary Biglaiser & Jacques CreÌmer & AndreÌ Veiga, 2013. "Migration Between Platforms," Working Papers, NET Institute 13-18, NET Institute.
  5. Greaker, Mads & Midttømme, Kristoffer, 2013. "Optimal Environmental Policy with Network Effects: Is Lock-in in Dirty Technologies Possible?," Memorandum, Oslo University, Department of Economics 15/2013, Oslo University, Department of Economics.
  6. Masaki Aoyagi, 2010. "Monopoly Sale of a Network Good," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0794, Institute of Social and Economic Research, Osaka University.
  7. Matthews, Steven A., 2013. "Achievable outcomes of dynamic contribution games," Theoretical Economics, Econometric Society, Econometric Society, vol. 8(2), May.
  8. COLLA, Paolo & GARCIA, Filomena, 2004. "Technology adoption with forward looking agents," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2004041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Steven A. Matthews, 2008. "Achievable Outcomes in Smooth Dynamic Contribution Games," PIER Working Paper Archive 08-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  10. Aoyagi, Masaki, 2013. "Coordinating adoption decisions under externalities and incomplete information," Games and Economic Behavior, Elsevier, vol. 77(1), pages 77-89.
  11. Steven A. Matthews, 2006. "Smooth Monotone Contribution Games," PIER Working Paper Archive 06-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  12. Mads Greaker & Kristoffer Midttømme, 2014. "Optimal Environmental Policy with Network Effects: Will Pigovian Taxation Lead to Excess Inertia?," CESifo Working Paper Series 4759, CESifo Group Munich.
  13. Steven A. Matthews, 2008. "Achievable Outcomes of Dynamic Contribution Games, Second Version," PIER Working Paper Archive 11-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 20 Jun 2011.

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