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Strategic delay and information cascades

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  • Edward Cartwright

Abstract

In a setting where agents must choose between two investments, Zhang (in RAND J Econ 28:188–205, 1997 ) proposed an equilibrium in which there is strategic delay. This equilibrium relied upon there being an information cascade. We shall demonstrate that an information cascade need not generally occur. It will only occur if and only if the cost of investing takes relatively extreme values. Taking this into account we derive a revised equilibrium that is still characterized by strategic delay. Copyright Springer-Verlag Wien 2015

Suggested Citation

  • Edward Cartwright, 2015. "Strategic delay and information cascades," Journal of Economics, Springer, vol. 114(1), pages 63-74, January.
    • Handle: RePEc:kap:jeczfn:v:114:y:2015:i:1:p:63-74
    DOI: 10.1007/s00712-014-0393-5
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    References listed on IDEAS

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    1. Gale, Douglas, 1996. "What have we learned from social learning?," European Economic Review, Elsevier, vol. 40(3-5), pages 617-628, April.
    2. Frisell, Lars, 2003. "On the Interplay of Informational Spillovers and Payoff Externalities," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 582-592, Autumn.
    3. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
    4. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-479, June.
    5. Jianbo Zhang, 1997. "Strategic Delay and the Onset of Investment Cascades," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 188-205, Spring.
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    More about this item

    Keywords

    Information cascade; Investment; Endogenous timing; D21; C72; L13;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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