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On the Interplay of Informational Spillovers and Payoff Externalities

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  • Frisell, Lars
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    Abstract

    Informational spillovers induce agents to outwait each other's actions in order to make more-informed decisions. If waiting is costly, we expect the best-informed agent, who has the least to learn from other agents' decisions, to take the first action. I study the interplay between informational spillovers and a direct payoff externality. I show that when the payoff externality is positive or relatively weak, the above intuition is validated. On the other hand, if the externality is negative and strong, the best-informed agent has the most to gain from outwaiting the other. Copyright 2003 by the RAND Corporation.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 34 (2003)
    Issue (Month): 3 (Autumn)
    Pages: 582-92

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    Handle: RePEc:rje:randje:v:34:y:2003:i:3:p:582-92

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    Cited by:
    1. Eric Rasmusen & Young-Ro Yoon, 2008. "First versus Second-Mover Advantage with Information Asymmetry about the Size of New Markets," Working Papers, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy 2008-15, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    2. Meub, Lukas & Proeger, Till & Hüning, Hendrik, 2013. "A comparison of endogenous and exogenous timing in a social learning experiment," Center for European, Governance and Economic Development Research Discussion Papers, University of Goettingen, Department of Economics 167, University of Goettingen, Department of Economics.
    3. Drehmann, Mathias & Oechssler, Jörg & Roider, Andreas, 2005. "Herding With and Without Payoff Externalities - An Internet Experiment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5310, C.E.P.R. Discussion Papers.
    4. Heidhues, Paul & Melissas, Nicolas, 2012. "Rational exuberance," European Economic Review, Elsevier, Elsevier, vol. 56(6), pages 1220-1240.

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