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Strategic Delay and the Onset of Investment Cascades

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Author Info
Jianbo Zhang
Abstract

I study the phenomenon of herd behavior in a framework where agents can endogenously choose both the actions and the timing of their actions. I assume that agents may have privately known quality and content of information. A unique symmetric equilibrium in pure strategies is proved to exist and characterized in its closed form. An investment cascade always occurs in the equilibrium, and a strategic delay is shown to exist before the sudden onset of the investment cascade. I also examine the loss of welfare from delay and information cascade

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File URL: http://links.jstor.org/sici?sici=0741-6261%28199721%2928%3A1%3C188%3ASDATOO%3E2.0.CO%3B2-Z&origin=repec
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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 28 (1997)
Issue (Month): 1 (Spring)
Pages: 188-205
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Handle: RePEc:rje:randje:v:28:y:1997:i:spring:p:188-205

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  1. Young-Ro Yoon, 2007. "Endogenous Timing of Actions under Conflict between Two Types of Second Mover Advantage," Caepr Working Papers 2007-013, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. [Downloadable!]
  2. Antonio Bernardo & Ivo Welch, 1997. "On the Evolution of Overconfidence and Entrepreneurs," University of California at Los Angeles, Anderson Graduate School of Management 1123, Anderson Graduate School of Management, UCLA. [Downloadable!]
    Other versions:
  3. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Jianbo Zhang & Zhentang Zhang, 1999. "Asymptotic Efficiency in Stackelberg Markets with Incomplete Information," CIG Working Papers FS IV 99-07, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
  5. Markus Noth & Martin Weber, 2003. "Information Aggregation with Random Ordering: Cascades and Overconfidence," Economic Journal, Royal Economic Society, vol. 113(484), pages 166-189, January. [Downloadable!] (restricted)
  6. Markus Noeth & Martin Weber, 2000. "Information Aggregation with Random Ordering: Cascades and Overconfidence," Econometric Society World Congress 2000 Contributed Papers 1592, Econometric Society. [Downloadable!]
  7. Zhao, Jinhua, 2005. "The Role of Information in Technology Adoption under Poverty," Working Papers RP2005/41, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  8. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-70, Summer. [Downloadable!] (restricted)
  9. Xue, J., 2006. "Collective Behavior with Endogenous Thresholds," Cambridge Working Papers in Economics 0613, Faculty of Economics, University of Cambridge. [Downloadable!]
  10. Vladimir Smirnov & Andrew Wait, 2004. "Industry sunk costs and entry dynamics," Economics Bulletin, Economics Bulletin, vol. 12(4), pages 1-7. [Downloadable!]
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