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Who goes first? Strategic delay under information asymmetry

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  • Wagner, Peter A.

    (Department of Economics, University of Bonn)

Abstract

This paper considers a timing game in which heterogeneously informed agents have the option to delay an investment strategically to learn about its uncertain return from the experience of others. I study the effects of information exchange through strategic delay on long-run beliefs and outcomes. Investment decisions are delayed when the information structure prohibits informational cascades. When there is only moderate inequality in the distribution of information, equilibrium beliefs converge in the long-run, and there is an insufficient aggregate investment relative to the efficient benchmark. When the distribution of information is more skewed, there can be a persistent wedge in posterior beliefs between well and poorly informed agents, because the poorly informed tend to ``drive out'' the well-informed.

Suggested Citation

  • Wagner, Peter A., 2018. "Who goes first? Strategic delay under information asymmetry," Theoretical Economics, Econometric Society, vol. 13(1), January.
    • Handle: RePEc:the:publsh:2171
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    Cited by:

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    3. Hubert Janos Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2018. "Who runs first to the bank?," CERS-IE WORKING PAPERS 1826, Institute of Economics, Centre for Economic and Regional Studies.
    4. Kiss, Hubert János & Rodriguez-Lara, Ismael & Rosa-Garcia, Alfonso, 2022. "Who withdraws first? Line formation during bank runs," Journal of Banking & Finance, Elsevier, vol. 140(C).

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    More about this item

    Keywords

    Strategic delay; social learning;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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