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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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File URL: http://www.sciencedirect.com/science/article/B6WJ3-4XVBPDN-2/2/6eed042fd6de1d036469b45724adfb8b
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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

Related research

Keywords: Strategic complementarity Network externality Coordination;

Other versions of this item:

Find related papers by JEL classification:

• D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
• D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

References

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Citations

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Cited by:

1. Masaki Aoyagi, 2010. "Monopoly Sale of a Network Good," ISER Discussion Paper 0794, Institute of Social and Economic Research, Osaka University.
2. 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.
3. 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.
4. COLLA, Paolo & GARCIA, Filomena, 2004. "Technology adoption with forward looking agents," CORE Discussion Papers 2004041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
5. Matthews, Steven A., 2013. "Achievable outcomes of dynamic contribution games," Theoretical Economics, Econometric Society, vol. 8(2), May.
6. 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.

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